Philips takes a shine to US lighting fixture maker Genlyte

European consumer electronics giant Royal Philips Electronics wants to shine on the North American lighting market. Just months after its purchase of LED lighting innovator Color Kinetics, Philips has announced it will buy lighting fixture maker Genlyte in a $2.7 billion deal that is expected to close in the first quarter of next year.
Philips is the world''s largest manufacturer of light bulbs in the world, but the company is taking a huge gamble in energy-saving lighting, having openly come out in favour of banning incandescent light bulbs. The company has been actively promoting compact fluorescent bulbs (CFLs) in retail stores.

Undoubtedly, Philips believes its future is in lighting, as the company''s other divisions seem to be sitting still. Philips has been muting its electronics business and attempting to benefit from the huge demand for its energy-saving bulbs.

Another lighting giant, Siemens, had previously teamed up with Osram to form an LED joint venture, while General Electric last year purchased from Emcore, the half of its LED joint venture GELcore, which it didn''t already own.

The Philips buyout of Genlyte represents a 52 per cent premium to company''s closing price on Friday 23 November. Analysts say that US non-residential construction remains robust despite the housing slump, so companies like Genlyte still have bright prospects - its earnings are expected to grow by more than 33 per cent over the next five years.

Philips is paying about 1.8 times trailing revenues, but since Genlyte has better operating margins than its new owner, the deal should immediately benefit the Philips bottomline. The merged entity will also be the largest North American lighting company.