ICU Medical trumps US private equity with $2.7bn deal for Smiths’ medical unit
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Smiths Group has agreed to sell its medical division to California-based ICU Medical for $2.7bn, with the industrial conglomerate snubbing a lower offer made by US private equity suitor TA Associates.
The FTSE 100 group is set to bank an extra $400m from the rival swoop in comparison with the TA Associates bid, generating an extra $50m of cash proceeds. Smiths Group shareholders will also receive about 10 per cent of the combined group’s shares, worth about $500m.
The deal value could rise by $100m depending on future performance.
Smiths Group said the terms of the new deal were “superior” and withdrew its recommendation to accept the TA Associates offer made last month.
The higher offer is a boost for the British manufacturer as it seeks to become more focused on industrial technology and increase its valuation, which analysts say has been depressed by the long-running saga over whether to spin off or sell its medical arm.
Chief executive Paul Keel said that “we are focused on concluding this superior transaction and on driving Smiths Group forward, delivering on our significant potential as a leading industrial technology group”.
Shares in Smiths rose 3 per cent to £14.68 on Wednesday.
Andy Douglas, an analyst at Jefferies, said: “This is a positive for Smiths and comes as something of a surprise.”
As planned under the previous deal, the board would return 55 per cent of initial net cash proceeds of £1.85bn to shareholders through a share buyback. It plans to use the remainder to strengthen its balance sheet and invest in growth.
US-headquartered Smiths Medical makes specialist medical equipment and single-use devices, reporting £918m in revenues in 2020. Its presence in the UK is small but it helped the country’s efforts to produce its own ventilators at the start of the first coronavirus wave last year.
However, the unit was regarded as a mismatch with the rest of the Smiths Group portfolio that ranges from making baggage scanners for airports to seals used in oil and gas projects.
The deal would unite Smiths Medical’s technologies such as syringe pumps and tracheotomy tubes with ICU Medical’s devices which include IV systems and blood pressure monitors to provide a comprehensive range of products needed in intensive care units.
“The combination of these two businesses makes sense for the medical device marketplace and fits well with ICU Medical’s existing business,” said Vivek Jain, chief executive of ICU Medical.
“Together, we will be a scaled global competitor and a US-based medical device company that increases the stability of the medical supply chain and can grow as clinical care models evolve.”
Smiths Group formally started the process to split its medical division in 2018, at which time ICU Medical had considered buying the business.
There is a $300m break fee if ICU Medical backs out of the acquisition. The deal is expected to be completed in the first half of next year.