Smiths Group: FTSE 100 giant to be broken up
Smiths Group has announced plans to ditch a big chunk of its business amid calls from investors for a major shake-up.
The FTSE 100 engineering group said on Friday it intended to sell off Smiths Interconnect and separate Smiths Detection via a demerger or sale.
Smiths said the move would enable it to double down on its John Crane and Flex-Tex businesses, unlocking “significant value” and enhancing returns to shareholders. However, job cuts are likely to follow.
Shares soared more than 10 per cent in early trading.
It comes after the US activist investor Engine Capital urged the conglomerate to follow other industrial companies by breaking up its four businesses earlier this month.
Smiths said it was targeting a transaction announcement for Smiths Interconnect, which makes electronic components and connectors, by the end of 2025.
The firm also unveiled a £500m share buyback programme to boost returns to shareholders, who are already in line for a large portion of the disposal proceeds from the break-up of its other divisions.
As part of the restructuring, a new board committee will be appointed to oversee execution.
Roland Carter, the Smiths Group’s lifer brought in as chief executive last March, said: “We are pleased with the financial and operating performance of the group over recent years, including the recent upgrade to earnings.
“Against this strong backdrop and since my appoointment, 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.”
He added: “We are conscious of the impact of making such changes to our people and will do so in a manner that is respectful to our employees, our customers and our suppliers and in the long-term interests of all our stakeholders.”
A further update will be provided at the group’s interim results in March. Shares are up just over 15 per cent over the last 12 months.