Smiths Group plc sale of Smiths Detection

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Smiths Group plc (Smiths) announces that it has entered into an agreement for the proposed sale of Smiths Detection to funds advised by CVC Capital Partners (CVC) (the Purchaser) (the Proposed Transaction). The Proposed Transaction values Smiths Detection at an enterprise value of £2.0bn, representing 16.3x headline operating profit of £122m and 12.5x headline EBITDA of £160m for the financial year ending 31 July 2025. Based on customary adjustments, Smiths expects to receive net cash proceeds of approximately £1.85bn.

The Proposed Transaction, in combination with the recently announced sale of Smiths Interconnect, represents significant further progress on the strategic actions announced in January 2025. This repositions Smiths as a focused, high-performance, industrial engineering company, and delivers significant value for all stakeholders.

Subject to completion of information and consultation processes (the Consultation) with the works council of Smiths Detection France SAS (the Works Council), and customary regulatory approvals, completion of the Proposed Transaction (Completion) is expected in the second half of calendar year 2026.

Roland Carter, Chief Executive of Smiths, said: “Today we have reached another significant milestone for Smiths, with the agreement to sell Smiths Detection to CVC for an enterprise value of £2.0bn. This builds on our recently announced sale of Smiths Interconnect and demonstrates strong execution against the strategic actions we set out in January centred on value creation.

“We are focusing Smiths as a premium industrial engineering company specialising in flow management and thermal solutions, and today’s announcement positions us strongly to deliver enhanced growth and returns.

“We thank our Smiths Detection colleagues for their significant contribution to Smiths and their help in reaching this milestone.”

Proposed Transaction highlights

• Highly attractive valuation: the enterprise value of £2.0bn represents a multiple of 16.3x headline operating profit of £122m and 12.5x headline EBITDA of £160m for the financial year ending 31 July 2025.
  
  
• The Proposed Transaction, together with the sale of Smiths Interconnect announced in October 2025, represents a combined enterprise value of £3.3bn.
  
  
• With the Proposed Transaction and the agreed sale of Smiths Interconnect, Smiths is now in the process of executing both strategic portfolio actions announced in January. Together, these transactions demonstrate continued progress in delivering on actions designed to maximise value creation, unlock portfolio value and enhance returns to shareholders.
  
  
• Repositions Smiths as a high-performance industrial engineering company focused on technologies in flow management and thermal solutions with high customer-centricity, leading positions in attractive, growing segments and a strong financial profile.
  
  
• Smiths intends to return a large portion of the net cash proceeds from the Proposed Transaction to shareholders and will provide an update on timing and mechanism in due course.
  
  
• Smiths intends to maintain a strong and efficient balance sheet alongside a solid investment-grade credit rating, whilst executing the £1bn buyback announced on 19 November 2025.
  
  
• Completion is expected in the second half of calendar year 2026, subject to the Consultation and customary regulatory approvals.

Proposed Transaction background and rationale

As announced on 31 January 2025, Smiths is committed to a strategy designed to unlock significant value, enhance returns to shareholders and deliver above market growth over the medium term.

A core element of this strategy is to focus Smiths as a high-performance industrial engineering company. Smiths supports customers in attractive energy, industrial and construction end markets underpinned by structural megatrends, and is well positioned for continued growth and margin expansion.

To achieve this, Smiths announced plans to separate both Smiths Detection and Smiths Interconnect in January 2025. The sale of Smiths Interconnect to Molex Electronic Technologies Holdings, LLC was announced on 16 October 2025. With the Proposed Transaction, Smiths is now in the process of executing both major portfolio actions outlined in the January strategic update.

After a competitive sale process, the Smiths Board of Directors (the Smiths Board) concluded that the terms of the Proposed Transaction represented a compelling value proposition, and a more compelling outcome than the alternative demerger which was also under consideration. In particular, the Smiths Board believes that:

• The Proposed Transaction value fully reflects the long-term growth and margin expansion prospects of Smiths Detection.
  
  
• The Proposed Transaction value compares strongly against relevant publicly available benchmarks.
  
  
• The immediate realisation of cash is a preferred outcome for shareholders, as compared to the demerger proposal.
  
  
• The net cash proceeds support further growth, as well as further substantial capital returns to shareholders over the medium term and provide an opportunity to invest in a more focused Smiths.

A new Smiths focused on efficient flow management and thermal solutions

The strategic actions taken position Smiths as a focused, stronger business specialising in efficient flow management and thermal solutions. Smiths, following Completion and completion of the sale of Smiths Interconnect (the Continuing Smiths), will have a stronger financial profile and growth potential, with the table below showing the historical financial performance of the combined John Crane and Flex-Tek businesses:

Note: The financial information above relating to John Crane, Flex-Tek and Central costs has been extracted without material adjustment from the consolidation schedules and supporting accounting records that underlie the audited consolidated financial statements of Smiths for the years ended 31 July 2022, 31 July 2023, 31 July 2024, and/or 31 July 2025 (as applicable).

¹ Total organic revenue growth calculated as the blended organic revenue growth rate of John Crane and Flex-Tek.
² Central costs shown as a percentage of aggregate John Crane and Flex-Tek revenue.
³ Total headline operating profit margin calculated as the aggregate headline operating profit or cost of John Crane, Flex-Tek and Central costs.

In March 2025, Smiths set out its new enhanced medium-term financial targets that reflect this superior financial potential of Continuing Smiths following Completion:

• Growth focused: 5-7% organic revenue growth through-cycle, with a
  21-23% headline operating profit margin and headline EPS growth of more than 10%.
  
  
• Cash generative: ~100% operating cash conversion, with a ROCE above 20%.
  
  
• Disciplined allocators of capital: Smiths will drive growth and productivity through RD&E, operational excellence and value-accretive acquisitions, underpinning a progressive dividend and enhanced returns to shareholders.

The Acceleration Plan to deliver productivity and capability enhancements, and a streamlined cost base, will help support the achievement of these targets. Smiths remains on track to deliver £40-45m annualised benefits in FY2027 and beyond, with approximately half expected in FY2026, for a total cost of £60-65m. Around 2/3 relates to the retained businesses and targets central costs remaining at 1.5-1.7% of revenue, following completion of the separation processes.

Use of proceeds

At Completion, Smiths is expected to receive approximately £1.85bn in net cash proceeds (after accounting for related transaction expenses and separation costs), subject to customary adjustments by virtue of the locked box accounts mechanism in the SPA (as defined below).

It is intended that a large portion of the net cash proceeds from the Proposed Transaction will be returned to shareholders and that any remaining net cash proceeds will be used to invest in organic and inorganic growth for the streamlined Smiths.

Smiths will provide an update on timing and mechanism in due course.

Smiths has engaged with the trustees of the Smiths Industries Pension Scheme and the TI Group Pension Scheme (Smiths two defined benefit pension schemes) (the Trustees) to discuss the use of net cash proceeds of the strategic transactions. Smiths does not currently anticipate any requirement to allocate any net cash proceeds of sale to either the Smiths Industries Pension Scheme or the TI Group Pension Scheme.

Impact on the assets and earnings

Based on the financials as reported at 31 July 2025, the financial impacts of the Proposed Transaction are currently expected to be as follows:

• Pro forma total headline operating profit for the fiscal year ended 31 July 2025 would be £383m (representing a £122m adjustment).
  
  
• Pro forma total assets would be £2,361m before completion of the Smiths Interconnect sale (representing a £1,650m adjustment). Pro forma total assets would be £1,854m after completion of the Smiths Interconnect sale (representing a £2,157m adjustment).
  
  
• Pro forma total liabilities would be £1,389m before completion of the Smiths Interconnect sale (representing a £562m adjustment). Pro forma total liabilities would be £1,283m after completion of the Smiths Interconnect sale (representing a £668m adjustment).

Board opinion

The Smiths Board believes the terms of the Proposed Transaction are in the best interests of Smiths shareholders as a whole.

UK Listing Rules

The Proposed Transaction, due to its size in relation to Smiths Group plc, is a significant transaction for the purposes of the UK Listing Rules of the Financial Conduct Authority (the UKLRs) and is therefore notifiable in accordance with UKLR 7.3.1R and 7.3.2R.

Enquiries

IR Contacts

Siobhán Andrews, Smiths Group plc

+44 (0) 7920 230093

siobhan.andrews@smiths.com 

Ana Pita da Veiga, Smiths Group plc

+44 (0) 7386 689442

ana.pitadaveiga@smiths.com

Media Contacts

Tom Steiner, Smiths Group plc

+44 (0) 7787 415891

tom.steiner@smiths.com

Alex Le May, FTI Consulting

+44 (0) 20 3727 1340

smiths@FTIConsulting.com 

Company Secretary

Matthew Whyte

+44 (0) 7775 982879

Goldman Sachs International

(Joint Financial Adviser)

Mark Sorrell / Charlie Lytle /
Nick Harper / Harry Webster

Tel: +44 (0) 20 7774 1000

J.P. Morgan Securities plc

(Joint Financial Adviser)

Richard Perelman / Alex Bruce /
Charles Oakes / Mayank Chaturvedi

Tel: +44 (0) 20 7742 4000

Freshfields LLP is acting as legal adviser to Smiths in connection with the Proposed Transaction.

About Smiths

For over 170 years, Smiths has been pioneers of progress, engineering a better future. Smiths strategy is to be a focused, efficient and value creating industrial engineering company operating in the attractive and growing segments of energy, industrials and construction.

Smiths focuses on solving the toughest problems for its customers, helping address critical global needs such as decarbonisation and the ever-increasing demand for process and energy efficiency. Listed on the London Stock Exchange, Smiths employs c.16,000 colleagues in over 50 countries. For more information, visit www.smiths.com.

 About Smiths Detection

Smiths Detection is a global leader in threat detection and security screening technologies for aviation, ports and borders, urban security, and defence segments. Its mission is to help make the world a safer place through advanced detection solutions that safeguard people, infrastructure, and society. In the financial year ended 31 July 2025, Smiths Detection generated revenue of £963 million and headline operating profit of £122 million. As at 31 July 2025, Smiths Detection had total assets of £1,650 million.

About the Purchaser

CVC is a leading global private markets manager with a network of 30 office locations throughout EMEA, the Americas, and Asia, with approximately €201bn of assets under management. CVC has seven complementary strategies across private equity, secondaries, credit and infrastructure, for which CVC funds have secured commitments of approximately €240bn from some of the world's leading pension funds and other institutional investors. Funds managed or advised by CVC’s private equity strategy are invested in approximately 150 companies worldwide, which have combined annual sales of over €165bn and employ more than 600,000 people. In the UK, CVC has over the last 10 years invested in best-in-class businesses including Formula One, Sky Bet, Domestic & General, RAC, Moto, Pension Insurance Corporation, Ontic, M Group Services, Neptune Energy and Hargreaves Lansdown, amongst others.

Important notices

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (MAR), and is disclosed in accordance with the Smiths obligations under Article 17 of MAR.

The person responsible for arranging the release of this announcement on behalf of Smiths is Matthew Whyte, Company Secretary

Legal Entity Identifier (LEI): 213800MJL6IPZS3ASA11

Forward-looking statements

Certain information contained in this announcement may constitute “forward-looking statements,” which can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue,” “target” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. These forward-looking statements include matters that are not historical facts and include statements regarding Smiths intentions, beliefs or current expectations concerning, among other things, Smiths results of operations, financial condition, liquidity, prospects, growth and strategies. Due to various risks and uncertainties, actual events or results or actual performance of Smiths may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements. Save as required by applicable law or the UKLR, Smiths expressly disclaims any intention, obligation or undertaking to update, review or revise any   of   the   information   or   the   conclusions   contained   herein,   including   forward-looking   or   other   statements contained in this announcement, or to correct any inaccuracies which may become apparent whether as a result of new information, future developments or otherwise. 

Cautionary notice

This announcement may not be distributed, directly or indirectly, in or into or from any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. This announcement does not constitute or form part of an offer to sell or issue, or any solicitation of an offer to buy or subscribe for, any securities referred to herein in any jurisdiction. The distribution of this announcement and other information in connection with the Proposed Transaction in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.  No statement in this announcement is intended to be a profit forecast.

Information in this announcement cannot be relied upon as a guide to future performance.

Rounding

Certain figures included in this announcement have been rounded. Accordingly, figures shown for the same category may vary slightly and figures shown as totals may not be an arithmetic aggregation of the figures that precede them.

Enterprise value

Throughout the announcement, the enterprise value of Smiths Detection is stated on a debt free, cash free basis and before taking into account any adjustments required under the terms of the Proposed Transaction, tax, and associated transaction costs.

Important information relating to the joint advisers

Goldman Sachs International (Goldman Sachs), which is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and regulated in the United Kingdom by the Financial Conduct Authority (FCA) and the PRA, is acting as joint financial adviser exclusively to Smiths and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than Smiths for providing the protections afforded to clients of Goldman Sachs nor for giving advice in connection with the matters set out in this announcement or any transaction, arrangement or other matter referred to in this announcement.

J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove (J.P. Morgan Cazenove), is authorised in the United Kingdom by the PRA and regulated by the FCA and PRA. J.P. Morgan Cazenove is acting as joint financial adviser exclusively to Smiths and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Smiths for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor for providing advice in relation to any matter referred to herein.

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