Royal Philips Electronics has announced that the company had signed an agreement with Kohlberg Kravis Roberts & Co. (KKR), Silver Lake Partners and AlpInvest Partners NV (together referred to as “the consortium”) through which the consortium will acquire an 80.1% stake in Philips’ Semiconductors business, with Philips retaining a 19.9% stake in this business.

The transaction will put the enterprise value for Philips’ Semiconductors business at approximately €8.3 billion (approximately, $10.64 billion) – consisting of €3.4 billion ($4.36 billion) purchasing price, €4.0 billion ($5.13 billion) for debt and other liabilities, and €0.9 billion ($1.15 billion) for Philips’ remaining stake. Philips estimates it will receive cash proceeds after tax and transaction related costs of approximately €6.4 billion ($8.21 billion). The transaction is expected to close in the fourth quarter of 2006, subject to closing conditions, including governmental and regulatory approvals.

Philips’ Semiconductors is a supplier of silicon system solutions for mobile communications, consumer electronics, digital displays, contactless payment and connectivity, and in-car entertainment and networking, with approximately 37 000 employees worldwide. The business had sales in 2005 of €4.6 billion ($5.9 billion).

“This is a defining moment for both Philips and its semiconductors business. As a stand-alone company, the semiconductors business will have every opportunity to realize its full potential and we are very pleased to have found strong partners that share our belief. As a business partner, we will remain strongly committed to the future success of the business. As Philips, we are completing our shift away from running cyclical activities, and can fully focus on building an even stronger company in Healthcare and Lifestyle around the brand promise of Sense and Simplicity,” said Gerard Kleisterlee, president and chief executive of Royal Philips Electronics.

Upon completion of the transaction, Mr. Frans van Houten will relinquish his current positions as member of the Board of Royal Philips Electronics and chief executive of Philips’ Semiconductors business to become the president and chief executive of the new stand-alone semiconductors company. The renaming of the new company will be announced in due course.