November 14, 2018 / 7:47 AM / a month ago

UPDATE 1-Smiths Group to spin off healthcare unit after failed merger talks

(Adds details on the separation, ICU deal talks)

Nov 14 (Reuters) - Smiths Group Plc said it intends to spin off its healthcare unit, just two months after ending talks with U.S.-based ICU Medical Inc over a possible 7 billion pound-plus ($9.10 billion) merger of their healthcare businesses

The separation will enable the British engineering group to focus on growing as an industrial technology firm, it said on Wednesday.

"Following our focus on operational improvements and increased investment, we believe it is now time to prepare the separation of Smiths Medical from the rest of the group," Chief Executive of Smiths, Andy Reynolds, said in a statement.

Smiths Medical has been struggling of late, after being hit by delays in new product launches, some products losing certifications under new regulation and the loss of two contracts in the United States.

"Put bluntly, the planned separation of Medical will remove the business that has most often been a stumbling block," Jefferies analyst Sandy Morris said.

Smiths Group, which traces its roots back to a jewellery shop in south London in 1851, had said in September that the suspension of some of its medical products in Europe would hit its annual profit.

Talks with ICU Medical had ended because the parties were unable to agree on terms.

Smiths Group, which also makes airport baggage scanners, bomb detectors and industrial products, said on Wednesday that its plans for the separation were at an early stage.

Smiths Medical accounts more than a quarter of the group's revenue.

Separately, the company also said its first-quarter underlying revenue fell 1 percent.

$1 = 0.7692 pounds) (Reporting by Shashwat Awasthi and Noor Zainab Hussain and additional reporting by Tanishaa Nadkar in Bengaluru; Editing by Sunil Nair)

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