Take a deep breath

21 December 2007 By George Hay Follow @gfhay

The Dutch conglomerate has made its biggest acquisition ever. The concept is fine, but the price is a hefty four times sales. To add value Philips will have to meet some fairly stiff synergy targets.

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Royal Philips Electronics is to buy Respironics, the US medical systems firm, for E3.6bn ($5.1bn). The deal is the biggest Philips has ever undertaken.

Philips will pay $66 a share in cash, a 24% premium to Respironics' undisturbed share price of $53.1 on December 20. Respironics shares have risen 40% since the start of the year.

Respironics will recommend the deal to shareholders. The deal is expected to close in the first quarter of 2008.

Philips shares fell 2.1% to E30.06 in afternoon trading.

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