By Toby Sterling and Bart H. Meijer
AMSTERDAM (Reuters) -Exor NV, the investment arm of Italy's Agnelli family, has become the top investor in Philips by buying 15% of the healthcare technology group for about 2.6 billion euros ($2.8 billion), the companies said.
The deal is a welcome vote of confidence in the Dutch company, which is in the late stages of a huge product recall that began in 2021 and that knocked two thirds off its share price.
Philips shares rose 4.4% to 19.30 euros, while Exor (OTC:EXXRF) dipped 0.3% to 81.22 euros. Philips fits two of the three sectors Exor targets in its investment strategy - healthcare and technology. The third sector is luxury.
Exor purchased its stake on the open market and may later raise it to up to 20%.
Under a relationship agreement with Philips, it will take a seat on the company's supervisory board. Once proposed, Exor's representative will attend meetings as an observer until they formally join the board, a person close to Exor said.
While not an activist investor, Exor aims to play an active role in supporting Philips' strategy, the source said.
"Exor's substantial investment underlines their confidence in Philips' transformation into a healthcare technology company and its growth and value potential," Philips Chairman Feike Sijbesma said in a statement.
Philips executives told a media call that Exor had been researching a possible investment since last year but the share purchases, which trigger disclosure requirements under Euronext rules, came together in only several days with the assistance of an unnamed investment bank.
Exor, led by John Elkann, 47, the leading figure among Italy's Agnelli clan, still has some 2 billion euros left to invest after taking holdings in French healthcare group Institut Merieux and Italian hospital manager Lifenet.
Italy's most prominent business family also owns a stake in luxury shoemaker Christian Louboutin.
New York-born Elkann chairs car companies Stellantis and Ferrari (NYSE:RACE), both in Exor's portfolio with other investments such as The Economist magazine and Italian soccer club Juventus.
ING analysts said Exor's investments currently focus on listed firms because they are "more interesting from a valuation perspective" than private markets, where values have not yet caught up with "reality."
Philips shares have rallied by 35% this year to close at 18.50 euros on Friday. That compares with more than 60 euros per share before the recall.
"On top of being a med-tech company, Philips is also perceived as a value stock, having been impacted by the Respironics recall saga," ING said.
Philips has taken a 575 million euro provision for lawsuits related to the recall, and CEO Roy Jakobs said on Monday that Exor has not received any information beyond what has been made public about its ongoing talks with the U.S. Department of Justice over a settlement.
Philips last month reported core profit of 453 million euros and slightly upgraded financial targets for the full year.
($1 = 0.9147 euros)