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The share price of FTSE 100 engineering company Smiths Group has surged by as much as 17% after it said that it would bow to activist investor pressure and sell off its baggage scanning business and extend share buybacks.
It will spin off Smiths Detection, whose equipment scans bags at airports by demerger or sale, after hedge fund Engine Capital argued two weeks ago that the group was suffering from a “conglomerate discount”, and that it would be better for shareholders if it were split into parts.
We are pleased with the financial and operating performance of the group over recent years, including the recent upgrade to earnings. Against this strong backdrop and since my appointment, the board has spent considerable time evaluating the options to maximise shareholder value and address the persistent discount to the significant value embedded within the group.
We start from a position of strength and as we execute this strategy, we will become a more focused business with significant potential for future growth and value creation. Focusing on our world-class John Crane and Flex-Tek businesses and carefully managing the separation of Smiths Interconnect and Smiths Detection, we will deliver significant value for all stakeholders.
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