Smiths shuns previous medtech deal, instead opting for $2.4B from ICU Medical

After unveiling plans last month to sell its medical device business for $2 billion, the U.K. technology group Smiths announced that a better deal has come along from a once-previous suitor.

The company will walk away from its previous agreement with the private equity firm TA Associates in favor of a larger offer from California-based ICU Medical—one that adds about $400 million to the pot. 

The deal with ICU Medical also provides the opportunity to combine the two companies’ complementary medtech portfolios: Smiths Medical will bring its infusion pumps, peripheral catheters and respiratory hardware to ICU Medical’s line of intravenous therapy systems and consumable kits.

The result will be a global player that expects to see about $1.7 billion in IV therapy revenues plus another $750 million annually from devices for critical care, anesthesia and patient monitoring, the companies estimate.

“The combination of these two businesses makes sense for the medical device marketplace and fits well with ICU Medical’s existing business,” ICU Medical CEO Vivek Jain said in a statement.

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The larger Smiths Group has officially been looking to hive off its medtech division as early as 2018—following years of buyout rumors—when it first announced plans to separate its businesses and concentrate more on its core work in industrial technologies and the energy, defense and aerospace sectors.

Over the following years, the conglomerate considered demergers and sales—including a previous bid from ICU Medical that did not materialize—but ultimately postponed any transactions in the face of the COVID-19 pandemic. After saying it was back on track to make a deal this past March, Smiths said it fielded multiple offers before landing on TA Associates.

That August deal included net cash proceeds of $1.8 billion plus $200 million in shares amounting to a 30% retained equity interest in the planned company. TA Associates also pledged to serve as a growth investor in the company, laying out a strategy to drive Smiths Medical toward future acquisitions of its own.

But it was not to be. Calling ICU Medical’s subsequent pitch the “superior transaction,” Smiths expects to receive $1.85 billion in cash plus $500 million in ICU Medical shares, equal to about 10% of its extended share capital. In addition, the chance for an extra $100 million will be pegged to the future stock performance of the reformed ICU Medical business.