China's TPV approves deal to take Philips TV unit

Shareholders of China's TPV Technology Ltd have approved its taking on the loss-making television unit of Dutch group Philips Electronics, giving it a brand to help push its global expansion.

The deal marks the end of an era for Philips, Europe's largest consumer electronics maker, and an achievement for Chief Executive Frans van Houten, who within weeks of taking the helm last April earmarked the unit for disposal.

The deal will help Hong Kong-listed monitor and TV maker TPV gain market share, but in an industry where stiff competition makes for thin margins.

The unit will be held in a new venture in which Philips will retain 30 per cent, while TPV will hold 70 per cent and pay the Dutch company the higher of €50 million or 2.2 per cent of sales in royalties starting from the second year.

Philips, which is also the world's biggest lighting maker, has the right to sell the remaining 30 per cent shareholding in the joint venture after six years.

The companies will provide funding to the venture on a pro-rata basis of €100m of equity and €170m in shareholder loans.

Once a global leader, Philips's TV unit had notched up almost €1 billion in losses since the start of 2007 when competition with lower-cost Asian rivals began to intensify.

Shares in Philips, which have dropped 31 per cent from a year ago as investors questioned the CEO's ability to restore growth and profitability, were down 2.6 per cent on Wednesday.

Shares in TPV, which has a market value of about HK$5.6 billion ($726m), fell 71 per cent in 2011 but have jumped more than 70 per cent so far this year. The stock was down 2.02 per cent on Wednesday.

Shane Tyau, TPV chief financial officer, told reporters after the shareholder meeting that TPV had already established its brand in the PC monitor business.

"In the TV sector, obviously our brand is not a consumer electronics name. We need a brandname like Philips, in particular. It already has an established market, and that can allow us to promptly reach out to the market in Europe as well as other of Philips's existing markets," Tyau said.

"TV business is a fast-changing business with new models and technologies coming up any time," he said. "TPV's strength is its speed of innovation. We can achieve this goal if there is a brand for us."

In 2003, China's TCL Multimedia bought France's Thomson TV business. TCL has made losses for most of the past five years due to weak margins in its TV business.

Philips's market share has been eroded by new players in the business, such as Sony Corp, Samsung Electronics Co Ltd and LG Electronics Inc, which are rolling out sleeker LCD (liquid crystal display) TV sets.

Last month, Philips said it swung to a fourth-quarter net loss as government cuts ate into its healthcare equipment business and a slowdown in European construction activity and consumer spending hit its lighting operations.