British engineer Smiths Group is in talks to merge its medical division with an American rival in a £6billion tie-up.
Smiths, which makes products such as resuscitators and airport security scanners, is looking to fight off becoming the latest target of an activist investor.
Though the structure of a merger with Nasdaq-listed ICU Medical has yet to be agreed, reports suggest it could take the form of a joint venture, rather than ICU buying Smiths’ medical business outright.
Smiths, which makes products such as resuscitators and airport security scanners, is looking to fight off becoming the latest target of an activist investor
ICU, which makes products for cancer treatment and blood infusions, is worth £4.2billion, while the Smiths medical division is thought to be valued at more than £2billion.
The talks, which are being led by the Smiths chief executive, Andy Reynolds Smith, have been stoked by speculation that an activist fund has acquired a stake in the UK group.
It has sparked fears that the investor could force a break-up of the business, following a recent spate of shareholder activism in the UK.
Leisure giant Whitbread caved in to investor pressure earlier this year to spin off its Costa Coffee business, and engineering giant GKN was sold to asset strippers Melrose after vulture hedge fund Elliott took a stake.
From clocks to catheters
- Smiths Group, founded in 1851 by Samuel Smith, sold clocks, watches and jewellery
- It pioneered the first British speedometer in the 20th century which was used by car manufacturers including MG, Jaguar and Rolls-Royce
- Smiths moved into medical technology in 1958 when it bought Portland Plastics
- The conglomerate now employs around 22,000 people in more than 50 countries
- It has five divisions including a defence business which makes X-rays and body scanning equipment which is used in airports
- Smiths’ medical arm makes ventilators, resuscitators, catheters and other products for paramedics and doctors
- Its products and services are sold in 200 countries
- Last year it pulled in £3.3billion of sales – £951million from its medical business
Smiths Group is a 167-year-old business which started out as a small jewellery and watch shop in south east London.
The business is now a FTSE 100-listed multinational worth £6.8billion and operates five main divisions including John Crane, which provides engineering services for energy, pharmaceutical and mining industries.
Last year Smiths made £3.3billion in revenues, with medical sales its largest business, accounting for more than a third of revenues.
The company sells products including resuscitators, ventilators and blood transfusion equipment to hospitals.
But profits at Smiths disappointed investors earlier this year as its medical business was hit by delays to new product launches.
Sales dropped 4 per cent to £451million during the first half of its financial year, sending profits tumbling 12 per cent to £217million.
The results saw Smiths’ share price take a 13 per cent hit from highs earlier in the year, but it has since recovered to rise as much as 18 per cent.
ICU Medical reported its first-quarter results earlier in the month, with revenues of £280million and profits coming in at £3.7million.
A spokesman for Smiths said: ‘Smiths notes the press speculation regarding discussions involving its Smiths Medical business and confirms that it is in very early stage discussions about a potential combination of its medical division with ICU Medical.
‘The board of Smiths routinely reviews all options for the group’s portfolio of businesses to maximise value for Smiths shareholders.
‘There can be no certainty that a transaction will be concluded.’