Both Philips (PHG +4%) and Cree (CREE +3.4%) are up strongly after Philips announced it's merging its Lumileds LED component unit with its automotive lighting business to create a standalone company, and will "explore strategic options to attract capital from third-party investors for [the] business."
The move could be fueling hopes Philips will try to merge the unit with Cree, which competes against Lumileds in an LED component market that has seen intense price competition. As it is, Cree has often been the subject of M&A rumors (some of them involving Philips).
Philips, for its part, argues spinning off Lumileds and automotive lighting will help them grow sales to customers who currently view Philips as a rival. The company adds its internal lighting business will be focused on system/lamp sales going forward, and that it's open to an IPO for the spinoff.