Smiths Group to sell artificial lift business to Endurance Lift for $39.5m

FTSE 100 engineering company Smiths Group is to sell its artificial lift business to Endurance Lift Solutions, which provides artificial lift platform to the oil and gas industry, for $39.5m, in order to use the proceeds to reinvest in growth opportunities.

The deal, expected to close by the end of the year, is subject to regulatory approval and its management team will transfer to Endurance Lift.

The artificial lift business, which is part of the John Crane division of Smiths, primarily sells sucker rods for onshore upstream oil and gas customers in the US and Romania.

Chief executive, Andy Reynolds Smith, said: "This disposal demonstrates our ongoing commitment to increasingly focus our portfolio on building technology differentiated leadership positions in our chosen markets.

“The capital released from this transaction will be reinvested in attractive growth opportunities, whilst allowing the artificial lift business to progress under different ownership."

For the year ended 31 July 2015, the business and assets of $63.2m had combined revenues of $90.8m and an operating loss of $1.8m.

Investment banking firm PPHB was a financial adviser to Smiths during the disposal.

RBC Capital Markets said the market had been hoping for Smiths' exit from the artificial lift business for some time as the business was set to make an operating loss of $10.8m for the year ended July, from $1.8m last year, and revenue of $53.4m from $90.8m.

“In the context of those financials, the consideration achieved looks a good outcome. The mechanics of the disposal imply that our 2016 John Crane margin, on a pro forma basis, would increase about 200 basis points to 23.9% and 50 basis points at group level (17.3% from 16.8%).

“Pre-tax profit accretion, again on pro forma 2016 and assuming neutral tax impact, is around 2%. Aside from the improved financials, it is evidence that the portfolio reshaping story continues with streamlining as well as acquiring”

Shares in Smiths Group were up 0.07% to 1,416p at 1112 BST.