Agnellis’ Exor Buys 15% Stake in Philips for $2.8 Billion

(Bloomberg) -- The Agnelli family’s Exor NV bought a minority stake in Koninklijke Philips NV, a vote of confidence for the troubled Dutch medical company as it grapples with a costly product recall.

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Exor bought a 15% holding in Philips through on-market share purchases and an agreement with a major financial institution, according to a statement Monday. The deal is valued around €2.6 billion ($2.8 billion).

While Exor doesn’t plan to buy more Philips shares in the short term, the deal allows the company to eventually increase its stake to 20%, according to the agreement. Exor will get a seat on the Dutch company’s supervisory board.

Under the leadership of John Elkann, Exor, with a net asset value of about about €28 billion at the end of December, has been diversifying its investments in recent years beyond the car industry to health care, tech, financial services and luxury.

“The path of change taken by Philips in recent years has created a company that combines two areas – health care and technology – to which we are committed,” Elkann, the billionaire family’s leader and Exor’s chief executive officer, said in the joint statement.

Philips rose as much as 6.2% in Amsterdam trading, the biggest gain since April.

Read more: Philips Says Most Recalled Devices Unlikely to Harm Health

Exor’s investment is “positive and supportive” of the Philips management team and its business plan, company executives said on a media call. The deal won’t provide additional liquidity for Philips, CEO Roy Jakobs said.

Philips, a maker of ventilators and cardiographs, has been grappling with uncertainties surrounding a recall of millions of medical devices to treat sleep apnea since June 2021. The company has set aside around €1 billion to recall some 5.5 million devices and booked additional provisions of €575 million as part of a planned settlement in the US to compensate patients.

Philips is also being investigated by the US Department of Justice and remains in discussions with the Food and Drug Administration regarding a proposed consent decree. The company has not yet made any provisions for these matters. While shares have recovered this year, they’re still trading at less than half the price of mid-2021.

In the past couple of decades, the 132-year-old Philips has moved away from its historic roots in consumer electronics like shavers, televisions and toasters. In 2014, Philips severed ties with its founding lighting business to exclusively focus on health care. Today, the company is one of the world’s biggest manufacturers of respiratory gear and body scanners.

The Agnelli family owns 53% of Exor through a separate holding company named after Fiat founder Giovanni Agnelli that includes dozens of his descendants as investors. Exor also controls sports carmaker Ferrari, Juventus Football Club and owns stakes in carmaker Stellantis, as well as The Economist Group.

The Philips deal marks its latest step in the medical field. Last year, the Agnellis’ holding company invested more than €800 million to acquire a minority stake in the global healthcare holding of France’s Merieux family.

Exor cashed in $9 billion last year through the sale of reinsurer PartnerRe to France’s Covea.

(Updates with background information from the eighth paragraph)

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