Aerospace disposal
On 4 May 2007 Smiths completed the sale of its aerospace business and Times Microwave Systems Inc. (TMS) to General Electric Company. Smiths received proceeds of £2.6 billion on completion. This disposal was approved by shareholders at an EGM on 20 February 2007. It generated a profit on sale of £1.5 billion.
Aerospace
Smiths Aerospace comprised two principal business units – Aerospace Systems and Aerospace Components. Aerospace Systems designed, manufactured and provided in-service support for digital, electrical power and mechanical systems for both the military and commercial markets. Aerospace Components supplied high-value components to the principal aircraft engine manufacturers. In addition TMS, previously reported within Specialty Engineering, was included as part of the sale. TMS products included components for military and commercial aerospace, shipboard and wireless applications.
Smiths Aerospace, headquartered in London, had approximately 11,500 employees and operated manufacturing facilities in five countries. Smiths Aerospace developed organically and through the acquisition of Lear Siegler in 1987 and the merger with TI Group in 2000.
Background to the sale
The Board decided that the agreed price recognised the high quality of the business of Smiths Aerospace together with Smiths substantial investment in aerospace technology. The sale accelerated the delivery of value to shareholders.
Smiths continuing businesses serve strong and growing markets. The Board believes that the continuing Group has enhanced financial characteristics and is well positioned to generate substantial returns.
Return of cash to shareholders
Following completion of this sale, the Board returned £2.1 billion to shareholders. This cash return was approved by shareholders at an EGM on 11 June 2007.
The return of cash was carried out using a B share scheme, giving Shareholders a choice as to the form in which they receive their proceeds from the return and the timing of such return. The B shares have been admitted to trading on the London Stock Exchange.
B shareholders were able to elect between receiving a single dividend of 365p per B share, accepting an offer to sell their B shares for 365p per B share or retaining their B shares. B shares on which a dividend payment was made converted into deferred shares which have a negligible value. It is currently expected that JPMorgan Cazenove, acting as principal, will make a final purchase offer to acquire the 4.9 million retained B shares for 365p each, free of all dealing expenses and commissions, on or around 17 April 2008, although there can be no guarantee that such an offer will be made.
Immediately after the allotment of the B shares, a capital reorganisation was undertaken. Existing ordinary shares were subdivided and consolidated so that Shareholders received two new ordinary shares for every three existing ordinary shares they owned at 5.00 p.m. on 15 June 2007.