Amsterdam, Netherlands – Philips called off a deal announced in January to sell its Lifestyle Entertainment business unit to Japan’s Funai Electric.
However, Funai subsidiary P&F USA will continue to market the business unit’s products on an exclusive basis in North America under an existing agreement that expires at the end of 2015.
Lifestyle Entertainment products include portable and tabletop home audio products, headphones, portable DVD players and accessories.
“Philips will proceed to investigate other opportunities for the audio, video, multimedia and accessories business while continuing to run this business within Philips, operating with a significantly lower cost structure as a standalone entity called Woox Innovations,” Philips said.
P&F USA will also continue as the exclusive North American licensee for Philips-brand consumer TVs, Blu-ray players, HTiBs and soundbars through 2015 under an existing separate agreement, which makes P&F USA responsible for the sourcing, distribution, marketing and sales of those products and products in the Philips Hospitality division in North America, Mexico and select Latin American countries.
Under the January agreement, Funai was to pay $200 million to take over production of Lifestyle Entertainment products and license the rights to market the products under the Philips brand for five years.
Philips contends Funai hasn’t taken the steps necessary to complete the deal and will seek damages, citing breach of contract. Funai denied the charge.
Woox is headquartered in Hong Kong, employs more than 2,000 people worldwide, generates 1.2 billion Euros ($1.65 billion) in sales, and posted positive net income for the year to date, the company said.
While it continues to operate the lifestyle unit, Philips will “investigate other opportunities to give this business a great future,” said Philips CEO Frans van Houten.
Since the deal was announced in January, “Philips has been working hard to prepare the business for transfer in the second half of this year,” van Houten said. “This process has now been completed. In the final preparation phase, Funai has refused to take the necessary steps to enable completion of the transaction and the transfer of the business.”
Philips will start arbitration proceedings in the International Court of Arbitration (ICC), he added.
For his part, Funai Electric CEO Tomonori Hayashi said, “We respected the agreement with Philips and feel that there is no grounds for breach.”
He added, “We have had a long and prosperous relationship with Philips and look forward to continuing that with our brand licensing and distribution agreements of Philips television and Lifestyle Entertainment products in North America.”