UK engineering firm Smiths Group has agreed to sell its medical division to ICU Medical for up to 2.8 billion US dollars (£2.03 billion) after the suitor trumped a previous private equity offer.
Smiths said the terms of the new deal are “superior” to the agreed sale to US buyout firm TA Associates, which was announced on August 2, and has therefore withdrawn its backing for the previous bid.
The deal with ICU Medical – an American medical technology specialist – values Smiths Medical at an enterprise value of 2.7 billion US dollars (£2 billion), plus a possible further 100 million US dollars (£73 million) depending on ICU’s future share price performance.
With debts stripped out, the equity value of the deal is 2.4 billion US dollars (£1.7 billion) – around 400 million dollars (£291 million) higher than under the TA acquisition, according to Smiths.
Smiths Medical makes ventilators, syringe pumps and tracheostomy tubes for hospitals globally.
The new cash-and-shares deal will also see Smiths receive a stake of around 10% in the merged ICU Medical group.
It marks the latest sale of a UK business to a foreign buyer, with another engineering firm, Meggitt, also recently at the centre of a bidding battle involving two US suitors.
Smiths said it plans to return 55% of cash proceeds from the deal to its shareholders – equivalent to around £737 million – through a shares buyback programme.
It added that the group’s board “expects to unanimously recommend the ICU transaction, and to send the requisite circular to Smiths’ shareholders requesting their approval of it”.
Smiths Group chief executive Paul Keel said: “Delivering on our commitment to maximise value, the ICU transaction provides both a higher value for Smiths’ shareholders as well as future value creation through our 10% holding of the enlarged combined group and a potential 100 million US dollar additional contingent consideration.
“We are focused on concluding this superior transaction and on driving Smiths Group forward, delivering on our significant potential as a leading industrial technology group.”
The deal – set to complete in the first half of 2022 – will boost ICU’s combined revenues to around 2.5 billion US dollars (£1.8 billion) and create a leading specialist in the field of infusion therapy.
Vivek Jain, chief executive of ICU Medical, said: “The combination of these two businesses makes sense for the medical device marketplace and fits well with ICU Medical’s existing business.
“Together, we will be a scaled global competitor and a US-based medical device company that increases the stability of the medical supply chain and can grow as clinical care models evolve.”