Agnelli family invests €2.6bn in Philips despite recall woes

Italy's billionaire Agnelli family has taken a 15% stake in Dutch electronics company Royal Philips, in what is being viewed as a much-needed vote of confidence in its decision to switch its focus from consumer products to healthcare technologies.

The investment arm of the Agnelli group – Netherlands-based Exor NV – has paid around €2.6 billion to become the largest shareholder in Philips, currently struggling with a reputation-damaging and costly product recall that has weakened its share price.

Starting in 2021, Philips launched a series of product recalls affecting its Respironics range of ventilators and other respiratory machines; most recently, a Class I recall of around 63,000 Trilogy Evo portable electric ventilators, due to a sensor problem that could lead to under-delivery of oxygen.

Other devices in the Respironics range have also been recalled, due to problems with the foam used to soundproof the devices breaking down and being inhaled by patients, prompting investigations into the failures by authorities in the US and France. The total number of machines affected is in the millions.

Since the recalls began, Philips has seen its share price plummet from a peak of more than €50 in mid-2021 to its current level below €19.50. The problems claimed the job of former chief executive, Frans van Houten, who stood down in February to be replaced by Roy Jakobs, the architect of the company's recall effort.

The problems with the devices have also raised the threat of product liability claims, and Philips has already set aside hundreds of millions of dollars to fund legal defences and settle disputes.

In a statement, Exor said it is "fully supportive of Philips' leadership, strategy, and value creation potential" and may increase its stake to 20% as a "long-term minority investor." The deal does give it the right to nominate one person to Philips' board.

Jakobs, meanwhile, said that Exor's "investment in Philips, their long-term outlook, and increased focus on healthcare and technology, fit well with our strategy and substantial value creation potential."

He asserted that Philips is "well positioned to deliver on [Exor's] purpose to improve the health and well-being of people, creating value for all stakeholders."

The Agnelli family has traditionally focused on investments in the automotive sector - a natural progression, since Giovanni Agnelli was a founder of Fiat - but has latterly expanded its focus with investments in the healthcare and technology sectors. It also owns Italian Serie A football club Juventus.