Smiths Group shares soar after bid rejection

17th Jan 2011 13:12

Shares in Smiths Group were soaring Monday after the maker of medical devices and airport scanners said after the close of trading on Friday that it had rejected a £2.45bn approach for its biggest division Smiths Medical.It said it had carefully considered the approach, which came from the private equity group Apax according to media reports, concluding that continuing discussions on the basis of a sale at that level would not be in shareholders' best interests."In reaching this conclusion, the board has taken into account the quality and highly cash generative nature of Smiths Medical, both standalone and in the context of the group as a whole," the company said.It did not say who had made the bid, but a report in the Financial Times said that the private equity group Apax had approached Smiths late last year.Smiths Medical accounted for about 31% of the company's sales last year. Brokers were unsurprised that Smiths Group had rejected the proposed offer given its continuing growth prospects and management's confidence that it can lift margins."A clutch of new products launched over the last year or so are translating into better sales growth as well as contributing to better margins," said JP Morgan. "On the back of this and the strong cash flow of the business, management sees greater value in the business than that offered by the recent approach."Edison Investment, however, expects Smiths Group to be broken up at some point. "We feel that it is only a matter of time before a satisfactory bid will kick-start the process," the broker said.Elsewhere in the world of medical equipment, shares in Smith & Nephew, which makes artificial joints, are higher again on a new report that the US healthcare group Johnson & Johnson is considering a takeover approach.