SMITHS GROUP (SMIN) – Industrials
| Price: £24.74 +1.8% | P/E: 21.8x |
| Market Cap: £8bn | Yield: 2% |
Industrial conglomerate Smiths Group has agreed the sale of its Detection unit to private equity funds advised by CVC Capital Partners for an EV (enterprise value) of £2 billion.
The price represents a multiple of 16.3 times headline operating profit and 12.5 times headline EBITDA for the year to 31 July, which Smiths says ‘fully reflects’ the unit’s long-term growth and margin expansion prospects and compares strongly against relevant publicly available benchmarks.
Our View
Together with the sale of the Interconnect division, this means Smiths has sold businesses with an EV of £3.5 billion within a couple of months, which is good going in an environment which everyone is calling ‘challenging’.
A large portion of the net proceeds from the sale will be returned to shareholders, but the firm is likely to hang on to some of the cash to maintain its strong balance sheet.
As we’ve said previously, Smiths shares aren’t cheap so it has work to do to justify its valuation now it is a pure-play industrial engineering business with just two specialisms, flow management and thermal solutions.
Read the press release here: https://www.smiths.com/investors
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