(Bloomberg) -- Smiths Group Plc has struck a deal to sell its medical division to a subsidiary of private-equity firm TA Associates LLP for an enterprise value of $2.3 billion.
The group will also take a 30% stake valued at $200 million in the holding company in order to benefit from improved future performance at the device and equipment unit, according to a statement. The holding company could also receive a further $200 million, depending on the unit’s performance.
Shares in Smiths Group fell as much as 5.7% in early trading in London.
One of five divisions at the British industrial group, Smiths Medical employs about 22,000 people in 50 countries. Its products, which include catheters, syringe pumps and tracheotomy tubes for hospitals, have taken center stage in the U.K.’s fight against the pandemic, as the government ordered ventilators to treat severely ill Covid-19 patients.
The U.K. company had aimed to follow the path of Siemens AG and Royal Philips NV that have created focused health-care equipment suppliers via breakups. Earlier attempts to divest the division failed to generate acceptable bids, and the spinoff process was roiled by turbulence in global stock markets.
TA Associates’ proposal is superior to all others it received during the separation process and “is considered a better outcome for shareholders than a demerger,” Smiths Group said in the statement.
Smiths Group will receive net proceeds of $1.8 billion following the deal, which will be used to “support investments in growth and enable a significant return of capital to shareholders.” The deal should complete by the end of the year.
Following the deal, Smiths Group will be a “more focused industrial technology company with compelling opportunities for growth,” Chief Executive Officer Paul Keel said. TA Associates has invested in health-care for more than 30 years and will unlock Smiths Medical’s potential, he said.
Although the unit has strong brands and technology “it has not delivered consistently strong financial performance relative to its medtech peers,” he said in the statement.
Andy Douglas, an analyst at Jefferies, said the strategic rationale for the disposal is clear but “our initial take is that this is a slightly disappointing price for Smiths Medical, especially given the current multiples enjoyed elsewhere in the medical sector.”
(Updates with additional details throughout, CEO comment in eighth paragraph, share price in third paragraph and analyst comment in final paragraph.)
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