A link between Smiths Group of the UK and US giant General Electric to make groundbreaking anti-terrorism devices for use at airports has collapsed.
The companies said last March that they were forming a joint venture to serve the "fast-growing detection and homeland protection markets", a business potentially worth billions of pounds.
But Smiths today revealed that the partnership has split because of a failure to "agree on a strategic vision for the combined business". Smiths GE Detection, the new firm, had hoped to cash in on the huge demand for state-of-the-art scanning devices at airports. It would have focused on making technology to scan luggage for weapons, explosives and drugs, perhaps the most vital part of airport security.
A statement said: "Smiths and GE now announce that, after careful consideration, they have decided not to proceed to form the joint venture as they believe the interests of both businesses are best served by their remaining independent." Smiths declined to elaborate on the reasons, saying this would only give key information to competitors.
The move led to immediate speculation that Smiths, which has already sold off several key businesses, could be further broken up. The shares rallied hard on the talk, up 23p to 1019p.
Andrew Carter at Landsbanki said the collapse of the venture would refocus attention on Smiths as a bid target. "We expect investors to focus more on management credibility and rumours of activist stakebuilding are likely to surface again," he said.
Smiths won't have to pay a GBP35 million break-up fee, indicating the decision was mutual.
Analysts had seen the tie as a poison pill preventing GE from taking full control of the detection business.
The planned firm would have been 64% owned by Smiths and 36% by GE. The intention to form Smiths GE Detection was announced with some fanfare by GE boss Jeff Immelt and Smiths chief executive Keith Butler-Wheelhouse.
Butler-Wheelhouse said at the time that combining GE's resources and research capabilities with Smiths' products would "make the world a safer place". Smiths, the 75th-biggest company in the FTSE, said it will continue to work with GE on other ventures.
Butler-Wheelhouse said: "I am certain that, as an independent business, Smiths Detection has the flexibility, resources and technology to continue to service our customers as their needs change and grow."
(Evening Standard -- 09/20/07)