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Elliott Management built a stake of more than £300mn in London-listed Smiths Group ahead of the conglomerate’s announcement last week that it would pursue a break-up.
The hedge fund has accumulated an almost 5 per cent stake in Smiths over the past year, according to people familiar with the matter. Elliott is supportive of the company’s plan to sell or demerge two of its four core units and return much of the proceeds to its investors.
Smiths, whose businesses cut across aerospace, communications, energy and security, said last week that it would streamline its business, heralding the end of the last large industrial conglomerate listed in London.
US-based Elliott had been in touch with the company’s management in recent weeks, the people said. Engine Capital, a US activist investor, also has a position in Smiths and called last month for it to explore a break-up.
“As a large shareholder in Smiths, we welcome the value-enhancing measures announced by the company last week, including the simplification of its portfolio and the new share buyback programme,” said Elliott. “We look forward to an ongoing and constructive dialogue with the company in anticipation of the full presentation of its updated strategy on 25 March.”
Smiths declined to comment.
Elliott, which has about $70bn of assets under management, views Smiths as undervalued even after its shares gained 11 per cent on the back of last week’s announcement. The investor also sees scope for the company to boost buybacks beyond the £500mn already announced, said people familiar with the matter.
Smiths said that it aims to sell its electrical connectors business this year and will then demerge or sell its Smiths Detection group, known for its baggage-scanners at airports.
The company now plans to focus on industrial technologies via its John Crane division, which produces seals and components that control liquid and gas flows, as well as its Flex-Tek business, which makes heating elements.
Analysts at JPMorgan Chase said last week that Smiths shares could rise almost 50 per cent from where they were trading ahead of the break-up announcement if the company’s so-called conglomerate discount were fully removed.
Smiths announcement came just weeks after Engine Capital, with a roughly 2 per cent stake in the company, called for a break-up to bolster its valuation.
Smiths chief executive Roland Carter, who took over from Paul Keel last year, said the strategic overhaul was under way before the fund’s public intervention.
