Closing of the deal, which is expected at the end of the first quarter of 2012, will take place after necessary merger clearance, governmental and TPV shareholder approvals are obtained. As a result of this transaction, Philips will report a pre-tax negative deal result in the fourth quarter of approximately $A357 million in addition to approximately $A145 million that was already charged in previous quarters. This result includes separation costs of approximately $132 million.

“I am pleased that we have now signed the Television joint venture agreement with TPV. This agreement is important for both Philips and TPV and provides clarity to our consumers, trade partners and employees,” said Philips Chief Executive Officer Frans van Houten. “This joint venture leverages the strengths of both companies to improve the position of Philips Television in the market. It enables Philips to focus on expanding market leadership positions across our Healthcare, Consumer Lifestyle and Lighting sectors.”

“This partnership is an important step in realising our growth ambitions in the TV space,” said TPV Chairman and Chief Executive Officer Jason Hsuan. “The joint venture is an extension of our ongoing relationship with Philips for many years and we are confident that together we can become a major player in Television globally.”

The joint venture will be responsible for the design, manufacturing, distribution, marketing and sales of Philips’ Television worldwide, with the exception of mainland China, India, United States, Canada, Mexico and certain countries in South America. As part of this transaction, the Philips Television innovation and manufacturing sites, commercial organizations, headquarters and employee base of 3,500 will be transferred into the joint venture.

As part of the transaction:

• Philips will grant the joint venture the right to use the Philips brand for an initial term of five years with an automatic renewal for another five years, subject to the joint venture meeting certain key performance indicators.
• As of the second year of the license term, the annual royalty payable will be 2.2% of sales with a minimum of $A66 million per year.
• Upon completion of the transaction, TPV will obtain 70% of the shares in the joint venture for a deferred purchase price. This price will be calculated as 70% of an amount equal to four times the joint venture’s average annual EBIT. This right can be exercised at any time as of three years from the completion of the transaction. In addition, at any time after six years from completion, Philips has an option to sell the remaining 30% shareholding in the joint venture for a consideration calculated as 30% of the same formula.
• Both shareholders will provide funding to the joint venture on a pro-rata basis. This consists of a $A132 million equity contribution and $A225 million subordinated shareholder loans. Depending on the funding need of the joint venture additional $265 million senior shareholder loans can be made available.
• Given that pre-closing customer receivables will remain with Philips, Philips will provide a nine-month $A132 million senior bridge loan to the joint venture. Any potential extension beyond the nine months of this loan will be on a pro rata basis.
• Philips will provide a $A132 million subordinated loan to TPV.
• Within the first two years, Philips will provide $A245 million one-off advertising and promotion support for the TV business as an investment in the Philips brand. This amount is part of the deal result.