Smiths Group has unveiled plans to break up, marking the end of the last major industrial conglomerate listed on the London Stock Exchange, following pressure from Engine Capital, a US activist hedge fund holding a roughly 2% stake in the business, according to a report by the Financial Times.
The announcement sent shares in the engineering firm, which operates across aerospace, communications, energy, and security, soaring by over 10% on Friday. The plan will see Smiths sell or demerge two of its four main divisions, returning a significant portion of the proceeds to shareholders.
As part of the strategy, Smiths intends to sell Smiths Interconnect — its electrical connector manufacturing business — this year, followed by either a sale or demerger of Smiths Detection, known for its airport baggage scanners and explosive detection equipment.
According to Chief Executive Roland Carter, succeeded Paul Keel as CEO last year, plans for the restructuring were already underway before Engine Capital went public with its demands for a breakup to enhance shareholder value.
Following the divestments, Smiths will focus on industrial technologies through its John Crane division, which produces seals and components for fluid and gas control, and its Flex-Tek business, which manufactures heating elements.
“We wanted all the businesses to be performing exceptionally well and to execute this plan from a position of strength,” Carter stated.
Shares in the company climbed 11% as investors welcomed the restructuring. Analysts at Jefferies remarked that while the disposal of the detection business was unexpected, it was a sensible move.
In addition to the break up plan, Smiths is expanding its share buyback programme from £150m to £500m. The company, which has a market capitalisation of £7bn, confirmed it would retain its place in the FTSE index and provide further updates on its progress in its interim results.
