Transforming at a stroke the state of its balance sheet, Philips Electronics NV on Friday announced that it is to sell its 35% stake in the Japan-based Matsushita Electronics Corp to its partner in the venture, Matsushita Electric Industrial Co Ltd for a whopping $1,600m. Matsushita said the transaction was subject, among other things, to working out mutually acceptable definitive agreements and their approval by the directors of both Matsushita and Philips. It said the two would continue to exchange licences in the field of Matsushita Electronics’s present activities – manufacturing integrated circuits, television tubes and light bulbs. Matsushita Electronics has 22,000 employees in Japan, Singapore, Malaysia and the US. The market was pleasantly stunned by the deal, since no-one had realised that the stake was worth anything like the sum agreed. If it is three billion guilders up front, it is an incredible deal, one London-based analyst who declined identification exclaimed to Reuter. Philips said the sale was agreed because Matsushita Electronics was becoming too large for the joint venture status to be appropriate. Philips shares traded in London, Belgium and on the Instinet international trading system all soared on the news, by an average 9% by noon London time Friday; the Amsterdam share market was closed for a holiday. Although the sum will make a considerable dent in Philips’ net debt, it doesn’t get the company out of the woods altogether total borrowings are $8,500m.
