Philips sells $1.1 billion TMSC stake

In an effort to feed capital to its consumer electronics unit, Koninklijke Philips Electronics NV sold a portion of its stake in contract chip maker Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) for a gross proceed of €935 million ($1.1 billion), the Dutch company announced Tuesday.

The sale, which is expected to close Friday, will reduce Philips’ stake in the world’s largest contract chip maker from 21.5 percent to 19.1 percent, and will allow Philip to book about €700 million toward its fourth quarter earnings, the Amsterdam company said in a statement.

Philips first announced the sale of the 100 million American depository shares (ADS) on Oct. 8, which were then priced at $10.77 per ADS on Nov. 10, TSMC said in a separate statement.

Philips has been able to take advantage of TSMC’s rising stock price to reduce some of its debt, which at the end of its third quarter stood at €6.6 billion.

Philips will remain the largest shareholder in TSMC and plans to continue in that position for the foreseeable future, according to J.H. Tzeng, a spokesman for TSMC. Representatives from Philips could not immediately be reached for comment.

The two companies are strategic partners, working together in research and development (R&D) on such areas as advanced production processes including an 65-nanometer process. With the development of chips increasingly expensive to fund, such process partnerships are common among chip makers. For example, Philips and TSMC also partner in R&D with other companies, such as STMicroelectronics NV.

On the New York Stock Exchange (NYSE), Philips’ stock (PHG) closed on Monday at $26.83 per share, down $0.77 or 2.79 percent on the day’s trading. The company’s stock price has had a 52-week high of $28.01 per share with a 52-week low of $13.80 per share. Also on the NYSE, TSMC’s stock (TSM) closed Monday at $10.77 per share, down $0.65 or 5.69 percent on the day’s trading. TSMC’s stock price has had a 52-week high of $12.93 per share with a 52-week low of $5.89 per share.

— Sumner Lemon in Taipei contributed to this report.