Dan Coatsworth, head of markets at AJ Bell, said: “Smiths Group has made the next step in its transition away from a conglomerate structure.
“It has struck a deal to sell the Detection business to private equity group CVC.
“Smiths has got a good price for the unit which should please shareholders, particularly as they are in line for a cash payout.
“Selling the Detection business will dramatically change the revenue split in the rest of the group.
“Detection accounted for 29 per cent of revenue in the past financial year, the second biggest contributor to the group.
“Post-separation, the seals-to-filtration unit John Crane will become even more dominant within Smiths, as will the temperature management arm Flex-Tek.
“One might expect a tighter focus on specialist engineering to entice investors to pay a higher multiple of earnings for the shares.
“This event has already happened, with the shares having already jumped from 13 times forward earnings a year ago to 19.2-times.
“The market has clearly bought into the story that Smiths was in break-up mode, and investors have tried to stay one step ahead of the curve.”
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