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Smiths plans to list medical unit, focus on industrial technology

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By Justin George Varghese

(Reuters) – Smiths Group Plc plans to list its healthcare business, which makes respiratory devices and catheters, as it focuses on industrial technology services.

The healthcare business has suffered from product delays, stricter European regulations and two lost contracts in the United States.

A plan to merge it with U.S.-based ICU Medical fell through in September because Smiths and ICU could not agree on terms. In November, Smiths said it still intended to spin-off the business but gave no further details.

“Pursuing a demerger of Smiths Medical will lead to two stronger companies, each…maximising the opportunities in their respective markets,” Chief Executive Andy Reynolds Smith said.

Smiths Medical, historically the group’s largest business, employs more than 8,000 employees and generated revenue of 430 million pounds in the six months to Jan. 31.

“Finally, Medical will depart. If criticism can be constructive, if more pointed and informed questioning can keep Medical on its toes and unable to hide, so to speak, within a larger group, Medical is more likely to thrive, in our view,” Jefferies analysts said.


Subject to the approval of shareholders, Smiths expect to complete the listing during the first half of 2020.

It declined to comment on a likely value for the medical business and some analysts expressed concern given the unit’s recent troubles.

Liberum said Smiths would be hard pressed to achieve the brokerage’s valuation of 2.8 billion pounds made in September, let alone exceed it, through a demerger. Barclays cut its valuation of the business to 2.3 billion pounds, also in September, from an earlier 2.7 billion pounds.

In the first half of the fiscal year, to Jan. 31, operating profit at Smiths Medical fell 12 percent and underlying revenue fell 3 percent. Smiths expects the unit’s revenue to return to growth in the second half of the year.

Smiths, which traces its roots back to a jewellery shop in south London in 1851, has become a diversified conglomerate with interests ranging from energy operation John Crane to security business Smiths Detection, aerospace components maker Flex-Tek and Interconnect, which makes microwave frequency products.

The company, which has a market value of 5.6 billion pounds and employs 22,000 people, said total headline operating profit fell 1 percent to 246 million pounds in the first half.

“Questions will likely remain over the absolute quality of Smiths, but we believe a better Smiths is emerging and that Smiths can get better still,” Jefferies analysts said in a note.

The company’s shares rose as much as 4 percent on news of the planned listing before giving back some gains to stand 1.8 percent higher at 1,470 pence by 1015 GMT.

(Additional reporting by Pushkala Aripaka and Arathy S Nair in Bengaluru; Editing by Anil D’Silva and Kirsten Donovan)

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