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Philips, Funai Sign New CE Rights Agreements

Osaka, Japan – Funai Electric said Tuesday that is has signed an agreement with Royal Philips Electronics to transfer the Philips audio, video, multimedia and accessories businesses to Funai.

Under the terms the new agreement, Funai will pay Philips $201.6 million and a brand license fee for an initial period of five and a half years, with an optional renewal of five years.

The deal for the audio, multimedia and accessories businesses is expected to close in the second half of 2013.

The video business will transfer in 2017, based on existing intellectual property licensing arrangements. The gain on the transaction will be recorded at the closing date, Funai said in a statement.

“Change is good and this is truly an exciting time for us at Funai,” stated Funai president and CEO, Tomonori Hayashi. “This transaction will allow us to continue moving forward and grow as a global company. We will benefit from Philips legendary know-how and innovation as well as the wonderful talent they have in place around the world allowing us to work as a team to leverage and grow the Philips brand. Additionally, this will give Funai the opportunity to meet our goal of expanding our business into markets including West and Eastern Europe, Brazil, Russia, India and China.”

The new company is expected to begin operation in the third quarter of 2013.

This agreement does not impact any of Funai’s existing licensing agreements with Philips. Funai subsidiaries P&F USA and P&F Mexico will continue under their current license agreement for Philips televisions and video products through Dec. 31, 2015.

“With this transaction we are taking another step in reshaping the consumer lifestyle portfolio and transforming Philips into a leading technology company in health and well-being,” said Philips CEO Frans van Houten. “I am sure that today’s agreement with Funai, who has been our partner for over 25 years, will create a promising future for Philips audio/video entertainment and continuity for our customers. It will leverage Philips’ strong brand, innovation strength and leadership position in audio/ video entertainment, with Funai’s strong position in North and Central America and Japan, and its supply and manufacturing expertise.”

Hayashi added, “We are excited with the opportunity to create a global entertainment company with annual sales of more than $4.5 billion. Our shared strategy is to transform our portfolios towards connected entertainment and to capture new growth opportunities. We see this change as nothing but positive and look forward to growing a successful business with the Philips team.”

Philips audio, video, multimedia and accessories make up the lifestyle entertainment business group within Philips Consumer Lifestyle.

The business group is headquartered in Hong Kong and employs approximately 2,000 people worldwide.

Last April, Philips said it was finalizing a deal on a joint venture with Hong Kong-based TP Vision (TPV) that would give TPV 70 percent of the TV division.

The new deal is completely separate to the TPV partnership, and Philips remains a major shareholder in the TV business.

Funai said the new transaction with Philips is subject to customary conditions, including regulatory filings and works council procedures.

Philips’ remote control activities, which are predominantly business-to-business oriented, are excluded, the companies said.

Philips has struggled in recent years to compete with Asia competitors in the audio/video entertainment electronics business. It licensed off the brand and distribution rights for TV and video products to Funai in September 2008, and followed with similar deals with other partners for other parts of the world. Instead, Philips has focused on its healthcare, consumer lifestyle and lighting products.

It just reported a fourth quarter net loss of $477 million, which it attributed in part to restructuring charges and a provision for 509 million euro fine imposed on Philips as part of an EU probe into price-fixing in the cathode ray tube market.