Recent M&A Activity in the Lighting Industry - Freedonia Group Analysis

Cree divests Lighting Products Unit to Ideal Industries and Eaton announces spin off plans

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Mar 20, 2019, 13:53 ET

CLEVELAND, March 20, 2019 /PRNewswire/ -- The lighting industry has been no stranger to major restructuring in recent years. Since 2016, traditional major players – from General Electric to Royal Philips and Osram – have been divesting or spinning off once-core lighting operations.

Jennifer Mapes-Christ, Freedonia's Consumer & Commercial Group Manager, commented, "With lighting – both light sources and fixtures – experiencing heavy downward pricing pressure, this is a low margin business. Consumer type lighting, in particular, is a tough business to be in."

The trend has continued, even into lighting operations involving newer LED technologies that have also seen sharp price competition from lower cost manufacturers in China and elsewhere. Mapes-Christ points out "Even former lighting giants, including those in the cutting-edge LED space, are increasingly ceding these areas to concentrate on their higher margin operations."

Recently announced transactions include:

March 1– Eaton announced plans to spin off the company's LED-based lighting operations into an independent publicly-traded entity by the end of 2019. The new business will include Eaton's lighting business, its Airport Lighting business, and the Mains Lighting and Intrusion Systems businesses, but the Crouse-Hinds Industrial Lighting and the Life Safety Division's Emergency Lighting business will stay with Eaton.
March 15 – Cree announced the agreement to divest its Lighting Products unit to Ideal Industries (Sycamore, Illinois) for $310 million. This plan reflects Cree's stated goal of concentrating on its growing Wolfspeed semiconductor business. This deal, which is expected to close by in the second quarter of 2019, involves Cree's LED lighting fixtures, lamps, and lighting solutions for use in applications from consumer to commercial and industrial. Cree's targeted high-value operations are semiconductor technologies designed for use in electric vehicles, 5G telecommunications networks, and specialty applications for LEDs.

Ideal Industries, a company with existing businesses in hand-held tools and electrical components, has been developing operations in building management, including commercial lighting controls. CEO Jim James sees a lot potential growth in the lighting industry. At the time of the announcement of the transaction, he categorized the industry as "nearing a transformational phase" and pointed out "Building owners, architects and engineers clearly want large-scale solutions that are smart, sustainable and human."

Mapes-Christ agrees, "We forecast smart lighting in the commercial and industrial space to quadruple by 2025, benefiting primarily from interest in energy-saving efforts, using analytics and automation to reduce unnecessary light use, but also a drive to customize the color of lighting to make occupants more comfortable and productive."

Additional analysis of the lighting industry can be found in the following Freedonia reports:

Smart Lighting in the US

General Purpose LEDs & Other High-Efficiency Lighting

General Purpose Lighting Fixtures

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