- The FTSE 100 firm said it wants to sell Smiths Interconnect by the end of 2025
- US activist investor Engine Capital called for the business to be broken up
Smiths Group plans to offload a major chunk of its business to help boost shareholder returns, following pressure from a major investor.
The engineering firm said it hopes to sell Smiths Interconnect, which makes radio frequency components and semiconductor test applications, by the end of this year.
Once that deal is completed, the FTSE 100 company then intends to sell or demerge Smiths Detection, a baggage screening and explosive detector business.
Smiths said a ‘large portion’ of proceeds from these divestments would be returned to investors, who will also benefit from an additional £350million in share buybacks during 2025.
It comes a fortnight after a US activist investor, Engine Capital, which owns around a 2 per cent stake in the company, called for the business to be broken up.
Engine claimed Smiths’ conglomerate structure had seen shares trade at a discount to the company’s true value, despite its improved operating performance.
Outlook: Smiths Group now anticipates organic revenues will advance by 8 per cent or more this fiscal year, compared to a previous forecast made in January for at least 7 per cent growth
To close the valuation gap, Engine recommended that Smiths either be sold ‘in whole or in pieces’.
It said this could include spinning off Smiths’ John Crane in the US or selling other divisions.
‘With several recent breakups that have created tremendous value for investors in the industrial sector, we see a significant and timely opportunity for the board to unlock meaningful value for shareholders,’ Engine wrote.
Smiths Group shares soared 13.6 per cent to £21.18 on Friday morning following the strategic update, making them the FTSE 100’s biggest riser by far.
The London-based firm said the transactions will enable it to concentrate on ‘high-performance industrial technologies for efficient flow and heat management’ through its John Crane and Flex-Tek businesses.
Both divisions generated operating profit margins of more than 20 per cent in the last financial year, as well as returns on employed capital of over 25 per cent.
John Crane develops mechanical seals and filtration systems for sectors like energy, life sciences and mining, while Flex-Tek specialises in equipment that regulates the heat and flow of fluids and gases.
Roland Carter, chief executive of Smiths, said: ‘The board has spent considerable time evaluating the options to maximise shareholder value and address the persistent discount to the significant value embedded within the group.
‘We start from a position of strength, and as we execute this strategy, we will become a more focused business with significant potential for future growth and value creation.’
DIY INVESTING PLATFORMS
AJ Bell
AJ Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund dealing and investment ideas
interactive investor
interactive investor
Flat-fee investing from £4.99 per month
Saxo
Saxo
Get £200 back in trading fees
Trading 212
Trading 212
Free dealing and no account fee
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.
This article was originally published by a www.dailymail.co.uk . Read the Original article here. .