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Smiths Group has pushed its plan to sell its £1 billion electrical connector division and took the first step towards the dissolution of the last major industrial conglomerate in the London stock market.
The FTSE 100 company known for manufacturing security scanners for airports has started before the market sale of Smiths’ interconnection division and will begin the sales process in the coming days, according to those familiar with the issue.
The division could be worth around £1 billion, they added. Bankers at Goldman Sachs and JPMorgan are working on selling units that make high-tech components for satellites and aerospace communications.
Smith’s business spans aerospace, communication, energy and security. The company said earlier this year it would sell or demarcate two of its four core divisions and return the majority of its revenue to shareholders after being pressured by activist investors, including Elliott Management and engine capital.
Smith’s CEO Roland Carter argued at the time that the company’s corporate review was already underway before investor intervention. It followed the announcement of another FTSE 100 conglomerate, the three-stage split by DCC. Larger US conglomerates, such as Honeywell, General Electric and 3M, are also moving to break up themselves.
The sale of the Interconnect unit, which has around 2,600 staff, is the first step in the disbandment, according to the latest annual report.
The sale could attract interest from both private equity and trade associations such as Molex, Amphenol, Eaton, Aptiv and ITT, some people familiar with the plan said.
Smith said he plans to sell this year’s interconnection business, followed by a Demarger or sale of Smith detection.
Interconnect accounted for 13% of the company’s overall revenue in the six months leading up to the end of January. The business generated revenue of £222 million and operating profit of £305 million over the period.
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The company plans to shift its focus to industrial technology through its John Crane division, which manufactures seals and components that control the flow of liquids and gases, and the seals and components that control the Flex-Tek business, a manufacturer of heating elements.
Analysts say the disposal could eliminate “conglomerate discounts” on Smith’s stock price.
In February, shares hit an all-time high following announcements of plans to dissolve the stock before retreating. They’ve grown 14% this year, giving the company a market capitalization of nearly £7 billion.
Smiths Group, Goldman Sachs and Jpmorgan declined to comment. Molex, Amphenol, Eaton, Aptiv, and ITT did not respond immediately to requests for comment.
