Smiths Group has announced it is going to break up the firm, following pressure from activist investors.

Under new proposals, which are designed to "unlock significant value and enhance return to shareholders", the British engineering firm would sell Smiths Interconnect by the end of 2025.

This is set to be followed by a demerger or sale of its manufacturer of scanners used in airport security checks, Smiths Detection.

The firm stated that these two firms are "both attractive businesses with strong market positions" and the board has decided that the separation of these two divisions "now best serves the prospects of these businesses".

Smiths said it would continue to focus on its John Crane and Flex-Tek businesses, working to be "well-positioned in attractive markets" following the respective sales of Smiths Interconnect and Smiths Detection.

FT has reported that shares at the FTSE 100-listed conglomerate increased by as much as 10% following the announcement.

Chief executive officer at Smiths Group, Roland Carter, said: "We are pleased with the financial and operating performance of the group over recent years, including the recent upgrade to earnings. Against this strong backdrop and since my appointment, the board has spent considerable time evaluating the options to maximise shareholder value and address the persistent discount to the significant value embedded within the group.

"We start from a position of strength and as we execute this strategy, we will become a more focused business with significant potential for future growth and value creation. Focusing on our world-class John Crane and Flex-Tek businesses and carefully managing the separation of Smiths Interconnect and Smiths Detection, we will deliver significant value for all stakeholders."

As part of this announcement, the firm increased its current share buyback programme to £500m.

This follows the scheme of £150m set to complete by the end of March 2025, with an additional £350m set to be returned to shareholders by the end of December.

Investment director at AJ Bell, Russ Mould, concluded: "You say jump and I say how high' appears to be the response of industrial conglomerate Smiths Group to pressure from activist investor Engine Capital.

"Engine’s public communication with Smiths Group has to rank as among the politest of any activist on record, with praise for the work that has been done to improve the business but with the strong contention that its structure is holding it back. The positive market response to today’s announcement lends credence to this view.

"It’s not a new argument that Smiths Group should break up as its units would attract higher valuations as individual entities, and the company has demerged businesses in the past.

"However, Smiths Group has historically resisted calls for a full dismantling of its conglomerate structure. Next steps will be closely watched, with Engine also floating the possibility of a US listing for its John Crane energy services arm which Engine describes as its jewel in the crown."

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