Royal Philips says it will start the process to combine its Lumileds (LED components) and automotive lighting businesses into a stand-alone company within the Philips Group.

Philips will explore strategic options to attract capital from third party investors for the business. Philips intends to remain a shareholder and customer of the new company and will continue the existing innovation collaboration.

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“Guided by our long-term strategy, we continue to actively manage our portfolio of businesses,” said Royal Philips CEO, Frans van Houten. “Philips’ strategy in lighting is to intensify its focus on connected LED lighting systems and services, LED luminaires, and LED lamps for the professional and consumer markets.

“Both our Lumileds and automotive lighting businesses are strong players in the lighting industry and [are] ready to pursue more growth and scale, independently of Philips Lighting.

“As a world-leading lighting components business, they will have increased flexibility to attract additional investors to accelerate growth.”

Sales of the combined businesses were around EUR1.4bn (US$1.9bn) in 2013 and the new CEO is to be Pierre-Yves Lesaicherre, the current chief executive officer of Lumileds.

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The process to combine Lumileds and automotive into an integrated business within the Philips Group is expected to be completed in the first half of 2015.

Costs associated with setting up the combined business are believed to amount to EUR30m in the second half of 2014.

“I am confident the combined business will be able to extend its leading portfolio of digital lighting components and achieve robust growth, serving even more customers in the industry, including of course Philips Lighting,” said Philips Lighting CEO, Eric Rondolat.

“By combining Philips Automotive lighting and Lumileds, the automotive lighting customers will continue to benefit from a fully integrated end-to-end R&D and supply chain, enabling the adoption of LED technology in automotive applications.”