French aerospace and defense group Safran has reached an agreement to sell its U.S.-based subsidiary Morpho Detection and other detection-related activities to Smiths Group for an enterprise value of US$710 million, it recently announced.
“This transaction is in line with our announced strategy to focus our development on the aerospace and defense markets,” said Philippe Petitcolin, Chief Executive Officer of Safran, in a news release announcing the agreement. "Morpho Detection is in a number of detection segments and global markets and very well positioned to benefit from attractive trends in its end markets. We believe it will be a very valuable addition to Smiths Group's portfolio.”
Headquartered in Newark, California, Morpho Detection is part of Safran's Morpho business within its security segment and recorded revenue of $320 million in 2015. It provides solutions for detecting and identifying chemical, biological, radiological, nuclear, and explosive threats to improve security at borders, sensitive sites, and airports, including those in Germany, U.K., and China. Its contracts also include an agreement to research and develop explosives detection products for the U.S. Department of Homeland Security, according to Reuters.
The transaction is subject to regulatory approvals and customary closing conditions and is expected to be completed early in 2017, Safran said. Once completed, Morpho Detection will become part of Smiths Group's detection segment, which designs and manufactures sensors that detect and identify explosives, weapons, chemical agents, and other contraband.
“The threat environment for people and critical infrastructure around the world is constantly evolving and becoming more complex and sophisticated. The response, to keep people safe and the world running, demands cutting-edge technology and cost-efficient solutions,” said Andrew Reynolds Smith, Chief Executive of Smiths Group, in the same news release.
According to Reuters, Safran purchased 81 percent of Morpho Detection, previously called Homeland Protection, for $580 million in 2009. Its previous owner, U.S. conglomerate General Electric, sold its remaining 19 percent in Morpho Detection for 90 million euros ($99 million) in 2012.
Safran is not expected to use the cash for mergers and acquisitions activity as it focuses on a crucial increase in production of its LEAP aircraft engines for narrow body jets, Reuters quoted RBC Capital Markets analyst Rob Stallard as saying.