Philips has pulled out of a deal to sell its consumer electronics division to Japanese firm Funai, claiming breach of contract.

Instead, the audio, video, multimedia and accessories business will be held as a stand-alone subsidiary within Philips, named WOOX Innovations, the company said. Philips will also begin looking for other prospective buyers.

Philips announced the sale to Funai for €150m in January.

Philips said in a statement it will now take legal action to recover damages caused by Funai.

‘We regret we have to take this action, but we do so to protect our business and the interests of all our stakeholders,’ said CEO Frans van Houten.