17th Jan 2025 08:42
(Alliance News) - US activist investor Engine Capital is calling for Smiths Group PLC to follow other conglomerates and explore a break-up, according to the Financial Times.
Smiths is a London-based company that makes products spanning the aerospace, communications, energy and security sectors.
In a letter sent to the Smiths board and seen by the FT, New York-based Engine, which holds roughly 2% of the FTSE 100-listed company, argued it should launch a strategic review of its four businesses, or sell the group entirely.
"We believe that Smiths has significant value that is currently unrealised due to its conglomerate structure," wrote Engine managing partner Arnaud Ajdler and partner Brad Favreau. "It is time for the board to announce a strategic alternatives process."
In response, shares in Smiths Group were 3.5% higher at 1,827.00 pence each in London on Friday morning. It has a market value of GBP6.32 billion.
The activist's move comes less than a year after then-Smiths chief executive Paul Keel, who had defended the conglomerate's structure, departed for a US company half its size, the FT noted.
Ajdler and Favreau argued that Smiths was trading at a significant discount to a sum-of-its-parts valuation, and that it should follow other peers and break up. Smith could be worth a 60% premium to the current share price in a sale, they predicted.
"With several break-ups that have created tremendous value for investors in the industrial sector, we see a significant and timely opportunity for the board to unlock meaningful value for shareholders by optimising Smiths' corporate structure," Ajdler and Favreau wrote.
US industrial conglomerate Honeywell International Inc said last month it would consider spinning off its aerospace division after US activist investor Elliott took a USD5 billion stake and pushed it to split.
In the UK, FTSE 100 conglomerate DCC PLC fired the starting gun on a three-way split of its business in November.
Engine Capital, founded by Ajdler 12 years ago and now with roughly USD1.2 billion in assets under management, the FT noted.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2025 Alliance News Ltd. All Rights Reserved.