(Reuters) - British engineering firm Smiths Group Plc (SMIN.L) said on Thursday talks with U.S.-based ICU Medical Inc (ICUI.O) over a possible 7 billion pound-plus ($9.2 billion) merger of their healthcare businesses had fallen through.
Shares of ICU Medical, which makes devices used in infusion therapy and oncology, fell about 8 percent to $278.5 on the Nasdaq, while Smiths’ shares closed down 0.2 percent at 15.765 pounds, after hitting a five-month low.
Discussions ended because the parties were unable to agree on terms, Smiths said.
“The board recognized the complementary strengths of both businesses. However, it was important that any such combination did not undervalue Smiths Medical and its prospects,” it said.
Smiths, a provider of hospital equipment, industrial services and sensors to detect explosives, said in May it was in very early stage discussions about a potential combination of its medical division with ICU.
California-based ICU has had a good track record of takeovers after it bought here top shareholder Pfizer Inc's (PFE.N) infusion therapy business in 2016 and medical device maker Medical Australia Ltd MLA.AX late last year. [nL3N1NN1QA]
ICU has a market value of $6.2 billion, while analysts at Jefferies and Liberum say Smiths Medical was likely to have been valued at more than $3 billion.
“We don’t expect this to be the end of the story. The ICU talks show that [Smiths] management is now more open to offloading Medical (either partially or totally), which we think would be a sensible move,” said Liberum’s Ryan Gregory.
Smiths said it would continue to review all options for its businesses.
ICU Medical was not immediately available for comment.
Smiths Medical, the group’s largest unit, has been struggling of late, after being hit by delays to new product launches, some products losing certifications under new regulation and the loss of two contracts in the United States.
Smiths said last month it expected full-year revenue at its medical arm to drop 2 percent, but added its overall full-year performance would be in line with expectations. [nL4N1UE2NS]
“Medical has struggled for growth for most of the past decade; FY18 was supposed to see a return to growth, but instead it is set to show a decline,” Gregory said.
Sky News said last month the two sides were close to abandoning the merger. bit.ly/2MoStI5
“The breakdown in talks wasn’t a surprise given rumors in recent weeks, and I think that’s been reflected in Smiths share price which closed pretty much flat,” Gregory added.
($1 = 0.7633 pounds)
Reporting by Justin George Varghese in Bengaluru; additional reporting by Muvija M; Editing by Jan Harvey and Mark Potter