Amsterdam, The Netherlands and London, United Kingdom – Royal Philips Electronics (NYSE:PHG, AEX:PHI) announced today that the company has signed an agreement with Kohlberg Kravis Roberts & Co. (KKR), Silver Lake Partners and AlpInvest Partners NV (together referred to as "the consortium") through which the consortium will acquire an 80.1% stake in Philips' Semiconductors business, with Philips retaining a 19.9% stake in this business. The transaction will put the enterprise value for Philips' Semiconductors business at approximately EUR 8.3 billion – consisting of EUR 3.4 billion purchasing price, EUR 4.0 billion for debt and other liabilities, and EUR 0.9 billion for Philips' remaining stake. Philips estimates it will receive cash proceeds after tax and transaction related costs of approximately EUR 6.4 billion. The transaction is expected to close in the fourth quarter of 2006, subject to closing conditions, including governmental and regulatory approvals.

Philips' Semiconductors is a leading supplier of silicon system solutions for mobile communications, consumer electronics, digital displays, contactless payment and connectivity, and in-car entertainment and networking, with approximately 37,000 employees worldwide. The business had sales in 2005 of EUR 4.6 billion.

Commenting on today's announcement, Mr. Gerard Kleisterlee, President and CEO of Royal Philips Electronics, said: "This is a defining moment for both Philips and its Semiconductors business. As a stand-alone company, the semiconductors business will have every opportunity to realize its full potential and we are very pleased to have found strong partners that share our belief. As a business partner, we will remain strongly committed to the future success of the business. As Philips, we are completing our shift away from running cyclical activities, and can fully focus on building an even stronger company in Healthcare and Lifestyle around the brand promise of sense and simplicity."
Upon completion of the transaction, Mr. Frans van Houten will relinquish his current positions as member of the Board of Royal Philips Electronics and CEO of Philips' Semiconductors business to become the President and CEO of the new stand-alone semiconductors company. The renaming of the new company will be announced in due course.

Commenting on today's announcement, Mr. van Houten said: "Today's agreement with KKR, Silver Lake and AlpInvest represents an exciting foundation upon which our new semiconductors company can successfully grow and compete as a stand-alone company. The business, with its strong R&D capabilities and broad intellectual property portfolio, will continue to focus on strengthening its performance and presence in Mobile & Personal, Home, Automotive & Identification and Multi Market Semiconductors – our four key markets. We remain entirely committed to completing our successful business renewal program."

The consortium consists of KKR, one of the world’s most experienced private equity firms, Silver Lake, the leading private equity firm focused on technology and AlpInvest, a major Dutch-based private equity investor operating worldwide. The extensive expertise in technology buy-outs of the partners in the consortium is evidenced by buy-outs such as SunGard Data Systems Inc. in the US and Avago Technologies Ltd. in Singapore.

Commenting on the transaction, Johannes Huth, a Member of KKR said: "We are very pleased to be making this investment and are excited about the opportunity to work with the company's outstanding management team. With the support of the consortium and Philips as an investor, the company will continue to innovate in order to provide its customers with leading-edge solutions and products that drive growth."

Egon Durban, a Managing Director of Silver Lake Partners, commented: "We believe the Philips' Semiconductor business is well positioned to pursue and achieve significant expansion. We look forward to partnering with management to continue building value through a demonstrated commitment to innovative technologies and a strong share in both established and emerging markets."
Credit Suisse and Bank of America acted as lead M&A financial advisors to the consortium, with ABN Amro also providing advice. Clifford Chance and Simpson Thacher & Bartlett served as legal advisors.

For more information on this announcement, please visit: www.newscenter.philips.com.

The webcasting of the press conference on this announcement is accessible via www.philips.com/webcast. This will be live as from 10:00 CET on Friday, August 4, 2006 with a replay available shortly afterwards. For the analysts' conference call/audiowebcast on August 4, 2006 at 11:30 CET, please visit www.philips.com/investor.