Regulatory News Item
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
SMITHS SIGNS BINDING AGREEMENT TO SELL SMITHS MEDICAL TO ICU MEDICAL
The Company announced that the Company had entered into a put option agreement (the "Put Option") with ICU Medical. Pursuant to the Put Option, following the completion of an information and consultation process (the "French Employment Consultation") with the Social and
The French Employment Consultation has now been completed. Accordingly, the Company announces that it has exercised the Put Option and has now entered into a binding share purchase agreement with ICU Medical for the sale of
The Board has unanimously recommended the ICU Transaction as being in the best interests of shareholders. The ICU Transaction is superior to all other proposals received during the separation and sale process.
A circular containing further details of the ICU Transaction and a notice convening a general meeting of the Company will be published and sent to the Company's shareholders (other than those who have elected for notification by electronic communication) in due course (the "Circular"). At the general meeting to be convened, shareholders will be asked to approve the ICU Transaction.
Background to and reasons for the ICU Transaction
The ICU Transaction will create an expanded global medical device company, bringing a combined portfolio of products and solutions to more patients and providers worldwide. The combination represents a meaningful value creation opportunity through both revenue and cost synergies.
Principal terms of the ICU Transaction
The ICU Transaction values
The initial net cash proceeds on completion of the ICU Transaction are
Smiths shall also be entitled to an additional
ICU Medical will also pay Smiths
The ICU Transaction is a Class 1 transaction for Smiths under the
As is usual in transactions of this nature, the sale and purchase agreement contains obligations on both parties to obtain the required approvals, as well as customary warranties, indemnities and covenants.
As part of the ICU Transaction, Smiths and ICU Medical have agreed a trademark licence, which grants
As part of the ICU Transaction, Smiths and ICU Medical have agreed a shareholders' agreement to govern the relationship between Smiths and ICU Medical in respect of Smiths' holding of shares in ICU Medical. Smiths shall have the right to nominate up to one non-executive director to the ICU Medical board and appoint such director to the audit committee of ICU Medical for as long as Smiths owns at least 5% of the fully diluted enlarged ICU Medical share capital. Under the terms of the shareholders' agreement, Smiths' shares in ICU Medical shall be subject to a six-month lock-up.
ICU Medical has provided strong contractual commitments to Smiths to secure the necessary merger and foreign direct investment clearances and approvals by
Nevertheless, completion and receipt of the initial cash proceeds is expected in the first half calendar year 2022.
Use of Proceeds and Financial Effects of the ICU Transaction
The Board intends to balance the use of proceeds between investment in growth and a significant return of capital to shareholders. The retained net cash proceeds will be used to create a strong balance sheet to support investment in value creative growth opportunities. These are predominantly organic opportunities and include the Group's innovative accelerator programmes, which are aligned with long-term trends in sustainability, energy transformation and safety and security.
As previously announced, as shareholder input has already informed the amount and mechanism of capital return in respect of proceeds from the sale of
Following completion of the ICU Transaction, the earnings of the Group will reduce as a result of the ICU Transaction. It is expected that Smiths' progressive dividend policy will remain unchanged as a result of the ICU Transaction. Further information on the financial effects of the ICU Transaction will be set out in the Circular.
· Infusion Systems: includes products which deliver fluids and medication for pain management and the treatment of acute and chronic diseases for use in both hospital and home settings;
· Vascular Access: includes devices which allow healthcare workers to deliver fluids and medication to patients or to obtain blood samples from patients; and
· Vital Care and Speciality products: comprises devices to manage patients' airways, and systems to maintain patients' body temperature before, during and after surgery.
Key individuals at Smith Medical are
Trading results for
The trade, assets and liabilities of
Information on ICU Medical
ICU Medical is a leading infusion therapy company with global operations and a wide-ranging product portfolio that includes IV solutions, IV smart pumps with pain management and safety software technology, dedicated and nondedicated IV sets and needle-free connectors designed to help meet clinical, safety and workflow goals. In addition, ICU Medical manufactures automated pharmacy IV compounding systems with workflow technology, closed system transfer devices for preparing and administering hazardous IV drugs, and cardiac monitoring systems for critically ill patients.
Summary of information on the Group and future strategy
Following completion of the ICU Transaction, the Group will be a more focused industrial technology group united by a shared purpose, business characteristics and a common operating model. The Group actively manages its portfolio of businesses to ensure that they are targeted in growing markets where they can achieve a sustainable leading position.
Smiths' businesses share the same characteristics: technology differentiation; increasing digitisation; sustainably competitive; and a high proportion of recurring revenues generated by aftermarket and services. Smiths drives sustained competitive advantage through focused deployment of innovation and investment and relentless performance execution through its shared operating model, the Smiths Excellence System. The Group expects to benefit from applying an integrated approach to technology development, especially digital innovation, where Smiths' businesses can share and apply common solutions. This is underpinned by a strong financial framework that allows the Group to generate profitable revenue growth and superior returns.
The Group's continuing businesses are:
(c) Flex‑Tek: engineered components which heat and move fluids and gases for the aerospace, medical, industrial, construction and domestic appliance markets; and
(d) Smiths Interconnect: technically differentiated electronic components, subsystems, microwave and radio frequency products which provide secure connectivity for critical applications in the defence, aerospace, communications and industrial markets.
Following the recent appointment of
Current trading for the Group's Continuing Operations
The Group's Continuing Operations delivered strong profit conversion in FY2021, with headline operating profit up +7% on an underlying basis vs. the previous year. Headline operating profit margin increased +140bps on an underlying basis, reflecting the benefits of the strategic restructuring programme and disciplined cost control, and +270bps on a reported basis to 15.5%.
Following a resilient performance in FY2021, the Group's Continuing Operations have entered FY2022 with good order book momentum. While levels of recovery in our end markets differ and economic uncertainty and supply chain challenges continue, underlying revenue growth rates for the Group's Continuing Operations are expected to return, in aggregate, to around pre-COVID levels with further operational efficiency benefits and good cash generation.
We are increasingly confident about Smiths' future prospects and our ability to deliver excellent and sustainable value for all of our stakeholders.
+44 (0)20 7004 1600
Jemma Spalton, Director of Investor Relations
+44 (0)20 3727 1340
Alex Le May /
Goldman Sachs (Joint Sponsor, Joint Financial Adviser & Joint Corporate Broker) +44
(0)20 7774 1000
JP Morgan Cazenove (Joint Sponsor, Joint Financial Adviser & Joint Corporate Broker)
+44 (0)20 7742 4000
Gleacher Shacklock (Joint Financial Adviser)
+44 (0)20 7484 1150
Smiths is a global technology company listed on the
Throughout the announcement, the enterprise value of Smiths Medical is stated on a debt free, cash free basis and before taking into account any adjustments required under the terms of the ICU Transaction; tax; and associated transaction costs.
In this announcement: (i) references to "£" or "GBP" are to the lawful currency of the United Kingdom; and (ii) references to "$" or "USD" are to the lawful currency of the United States of America.
The sale proceeds received by Smiths under the terms of the ICU Transaction will be received in USD ($). Equivalents have been presented in GBP (£) in this announcement for illustrative purposes using a rate of
The trading results for Smiths Group Continuing Operations and Smiths Medical have been presented in GBP (£) and for illustrative purposes the USD ($) equivalents have been provided using the historical average exchange rates at the time the results were reported. These were
The numbers for Smiths Group Continuing Operations and Smiths Medical's balance sheet (gross assets and net assets) have been presented in GBP (£) and for illustrative purposes the USD ($) equivalents have been provided using the historical closing exchange rates at the time the results were reported. These were
The Group uses alternative performance measures ("APMs"), which are not defined or specified under the International Financial Reporting Standards ("IFRS") or any other internationally recognised generally accepted accounting principles, to gauge business performance. APMs are not considered to be a substitute for IFRS measures but do provide additional, helpful information. APMs are consistent with how business performance is planned, reported and assessed internally by management and the Board and provide comparable information across the Group.
These performance measures may not be comparable to other similarly titled measures as reported by other companies, as other companies may calculate these measures differently than the Group does; and these measures may not be permitted to appear on the face of the primary financial statements, or footnotes thereto, and in some cases, may not be permitted at all, in US filings made to the SEC. These performance measures have limitations as analytical tools, and none of these measures should be considered in isolation, or as a substitute for analysis of the Group's operating results, including its income statements and cash flow statements, as reported under IFRS.
Certain figures included in this announcement have been subject to rounding adjustments.
Forward Looking Statements
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "anticipates", "believes", "could", "estimates", "expects", "intends", "may", "plans", "projects", "should" or "will", or, in each case, their negative or other variations or comparable terminology, "targets", "aims", "forecasts" or by discussions of strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include, but are not limited to, statements regarding Smiths' intentions, beliefs or current expectations concerning, among other things, the Group, results of operations, financial condition, liquidity, prospects, growth and strategies of the Group and Smiths Medical.
By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of operations of the Group and Smiths Medical, and the developments of the markets and the industries in which they operate, may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement. In addition, even if the results of operations of the Group and Smiths Medical and the developments of the markets and the industries in which they operate are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. A number of risks, uncertainties and other factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, changes in law and regulation, currency fluctuations, changes in business strategy and political and economic uncertainty.
Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this announcement reflect Smiths' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial condition, prospects, growth and strategies.
Other than in accordance with its legal or regulatory obligations (including under the Listing Rules, the Disclosure Guidance and Transparency Rules, the Prospectus Regulation Rules, the Market Abuse Regulation (EU No. 596/2014) and the Market Abuse Regulation (EU No. 596/2014) as it forms part of domestic law by virtue of the
No profit forecast or estimates
Unless otherwise stated, no statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings, earnings per Smiths share or income, cash flow from operations or free cash flow for the Group or Smiths Medical, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings, earnings per Smiths share or income, cash flow from operations or free cash flow for the Group or Smiths Medical, as appropriate.
This announcement is not intended to, and does not constitute or form part of, any offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any offer to sell, dispose of, purchase, acquire or subscribe for, any security or a solicitation of any vote or approval, in any jurisdiction. Smiths' shareholders are advised to read carefully the formal documentation in relation to the ICU Transaction once it has been despatched. Any response to the ICU Transaction should be made only on the basis of the information in the formal documentation to follow.
The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and, therefore, any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. Any failure to comply with these requirements or restrictions may constitute a violation of the securities laws or regulations of any such jurisdiction. This announcement has been prepared for the purposes of complying with English law and the UK Listing Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.
Important information relating to the joint financial advisers and joint sponsors
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