Smiths Group in early talks to sell medical arm for up to £2bn

ENGINEERING firm Smiths Group is exploring a potential sale of its medical arm for £2bn following an approach by US healthcare firm CareFusion.

A source familiar with the situation confirmed to City A.M. last night that talks were taking place, but emphasised that they were at an early stage.

There has been no decision to sell, nor any agreement on price, the source said.

The division, which supplies hospitals and emergency services with equipment, is the second largest part of Smiths and provided 35 per cent of its operating profit last year.

The unit has previously attracted interest with private equity firm Apax offering £2.45bn for it in 2011. At the time Smiths rejected the offer, saying that it was not in the best interests of shareholders.

Earlier this year, analysts at HSBC said Smiths Medical was an attractive takeover target.

“As a strongly cash-generative business with attractive margins, there is a clear rationale for the largest consolidators in the healthcare sector such as Covidien, BD, B Braun and CareFusion to view Smiths Medical as a strategically sensible acquisition,” it said in a note.

Shares in Smiths closed yesterday at a two-year high of £13.90, up 48p, and giving the group a £5.3bn market capitalisation. Smiths Group declined to comment.