Smiths Group and ICU Medical in talks over healthcare merger
UK engineering business explores options for medical device unit
UK engineering business Smiths Group has held early-stage discussions with a US-listed company ICU Medical about a potential merger of their medical device businesses.
The FTSE 100 industrial conglomerate has for some time been exploring options for its medical unit, which makes healthcare products used in hospitals and played a role in the first successful test tube baby, according to two people close to the situation.
These have included talks about a potential combination of the unit with ICU Medical, a company based in California and quoted on Nasdaq with a market capitalisation of $5.6bn.
Other options have also been examined. One possibility was that Smiths Medical would be injected into ICU Medical and that Smiths Group would retain a stake in the new enlarged entity, one of the two people added.
However, one person close to the company cautioned that the talks with ICU, which were first reported by Sky News, were still at an early stage and there was no certainty of a deal happening. ICU makes intravenous pumps and devices used in oncology.
Smiths Medical generated revenue of £951m in its most recent financial year, against a figure of $1.29bn (£970m) at ICU Medical.
If any deal were to happen, it could go some way to reshaping the portfolio of one of the few remaining conglomerates listed on the London Stock Exchange. Smiths started out as a jewellery shop in 1851 and floated days before the outbreak of the first world war.
Today, it has five divisions that supply a range of products from airport X-ray scanners for the detection of explosives to mechanical seals used in crude oil pipelines.
Medical devices is its single largest business, with a portfolio of products that includes infusion pumps and mechanical ventilators. In 1978, its embryo transfer catheters played a vital role in the conception of Louise Brown, the first IVF baby.
The unit has been the subject of merger and acquisition speculation before. An approach by private equity group Apax to buy the division for about £2.45bn was rejected in 2011.
Over the past decade, Smiths has been viewed by analysts as a target for dismantling due to its collection of disparate businesses.
However, chief executive Andrew Reynolds Smith, in charge since 2015, previously insisted his mandate is to build rather than break up the company, while selling off smaller units that are not core.
Smiths reported disappointing half-year financial figures earlier this year, with pre-tax profits in the six months to the end of January down 12 per cent at £217m. Revenues fell 4 per cent to £1.55bn.
Even so, the stock has gained 15.4 per cent throughout 2018 to trade at £17.20.
Smiths Group declined to comment. ICU Medical could not immediately be reached for comment.