Royal Philips Electronics finally decided what the company will do with their TV business. RPE announced that the TV business will be spun off into a joint venture company with TPV Technology Ltd.

If the name TPV Technology Limited doesn’t sound familiar, we’re talking about a well known figure in Asian economy. TPV Technology is actually an investment holding company, with the public brand name AOC i.e. Admiral Overseas Corporation, originally founded in Chicago, IL.

Today, TPV Technology and its brands AOC and Envision are world’s largest display and TV producers, manufacturing over six million units per month. Also, this is not the first time the company is dealing with Philips since in 2005, they acquired PC monitor and Flat Screen TV business from Royal Philips Electronics.
Thus, their announcement was entirely logical – new joint venture will feature 70% share from TPV Technology, while Philips will keep the 30% share for at least 10 years.

Philips TVs will now be manufactured and advertised by the newly formed joint venture with TPV Technology
Philips TVs will now be manufactured and advertised by the newly formed joint venture with TPV Technology

The new JV receives the right to brand all of their TV products "Philips" for a period of ten years, with the final five being an option – depending on market reception.

In order to get the joint venture off the ground and ignite TPV Technology, Philips is infusing between 915 million and 1.19 billion US dollars, out of which $137 million will be used to shift 3,500 employees from one company to another. Furthermore, over the course of 2012 and 2013, Royal Philips Electronics will invest 257 million dollars into advertising to promote the Philips-branded TV sets. Philips already invested 151 million dollars and has set aside additional 372 million dollars to make the transition as smooth as possible.

On the other hand, TPV is investing 137 million dollars into the company and will pay for the 70% of share within the next two years. Furthermore, the newly formed JV has to pay 2.2% of their annual revenue to Philips, with the minimum set license fee set at 50 million dollars per year. Thus, it is fairly simple to calculate how many years Philips needs to stay on board with the current arrangement.

The transaction is expected to close during the first quarter of next year, so that the new company can start its operations on April 1, 2012 – as the first day of second quarter 2012.