Smiths Group has agreed to sell Smiths Detection to private equity firm, CVC Capital Partners, for an enterprise value of £2bn.

The move is part of the engineering firm’s plan to break up the firm following pressure from activist investors in January, with the aim of unlocking “significant value” and delivering above market growth in the medium term.

Smiths sold Smiths Interconnect to Molex Electronic Technologies for £1.3bn in October.

The new deal represents a value 16.3 times headline operating profit and 12.5 times headline earnings on Smiths full-year results in the year to 31 July.

Based on customary adjustments, Smiths expects to receive net cash proceeds of approximately £1.85bn.

Chief executive at Smiths Group, Roland Carter, said the deal demonstrates the firm’s "strong execution" against its strategic actions.

He added: "We are focusing Smiths as a premium industrial engineering company specialising in flow management and thermal solutions, and today's announcement positions us strongly to deliver enhanced growth and returns.

"We thank our Smiths Detection colleagues for their significant contribution to Smiths and their help in reaching this milestone."

Head of markets at AJ Bell, Dan Coatsworth, stated that Smiths had got a good price for the unit which would please shareholders.

He concluded: "Selling the Detection business will dramatically change the revenue split in the rest of the group. Detection accounted for 29% of revenue in the past financial year, the second biggest contributor to the group. Post-separation, the seals-to-filtration unit John Crane will become even more dominant within Smiths, as will the temperature management arm Flex-Tek.

"One might expect a tighter focus on specialist engineering to entice investors to pay a higher multiple of earnings for the shares. This event has already happened, with the shares having already jumped from 13 times forward earnings a year ago to 19.2 times. The market has clearly bought into the story that Smiths was in break-up mode, and investors have tried to stay one step ahead of the curve."

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