In two separate announcements the Smiths Group stated that it has agreed to sell Smiths Aerospace division to General Electric Co. for $4.8 B and that the two companies (Smiths Group and GE) have signed a letter of intent to form Smiths GE Detection, whereby Smiths will own 64 percent and GE 36 percent of the joint venture.
SALE OF SMITHS AEROSPACE
The board of directors of Smiths proposes, subject to completion of the sale and shareholder approval, to return £2.1 B, out of the net proceeds estimated to be £2.25 B, by means of a B share scheme, combined with a share consolidation, shortly after the completion of the sale.
The sale is conditional, amongst other things, upon obtaining merger and anti-trust clearances, including in the United States and from the European Commission, and the approval of Smiths shareholders at an extraordinary general meeting, with the sale targeted for completion during the second quarter of 2007.
Keith Butler-Wheelhouse, chief executive of Smiths, commented, “The structure of the aerospace industry is changing – in particular its increased capital requirements and the growing importance of supplier scale, especially as the next generation of large programs kicks in. The Board has considered these issues and the opportunities for Smiths going forward and last autumn instigated a thorough process, which has led to this announcement. By selling Aerospace, we crystallize the value for our shareholders. At the same time, we know that this business is going to a great owner.
SMITHS AND GE JOINT VENTURE
The joint venture will combine Smiths Detection with GE Homeland Protection to create a leading global business serving the fast-growing detection and homeland protection markets. Smiths GE Detection will offer a broad range of technologies to deliver integrated solutions to meet the rapidly evolving requirements of governments and other customers globally. By combining each parent company’s technological capabilities and the research and innovation resources available at GE’s Global Research Center, Smiths GE Detection will be well positioned to deliver the next generation of technologically advanced detection and homeland protection equipment worldwide.
The board of the joint venture will be chaired by Keith Butler-Wheelhouse and will consist of four Smiths and two GE representatives. The JV brings together two outstanding management teams and will be led by Stephen Phipson, currently group managing director of Smiths Detection, as its first president. Completion of the joint venture will be conditional, inter alia, on the consent of the boards of both companies, Smiths shareholder consent, certain regulatory approvals and the completion of the sale of Smiths Aerospace Division to GE.
Jeff Immelt, chairman and CEO of GE, commented, “We are delighted to bring our detection assets to the Smiths GE Detection joint venture. Under the leadership of Stephen Phipson and the combined executive team, there is no doubt that our complementary capabilities will enable us to bring new enhanced detection solutions to customers more rapidly. We look forward to a long-term relationship with Smiths to create a dynamic and innovative business to serve the growing global detection market.”