ValueAct Said to Buy Smiths as Fund Takes to U.K. Industry

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ValueAct Capital Management has bought a stake in British engineering company Smiths Group Plc, people with knowledge of the matter said, as the activist fund warms to U.K. industrials. Smiths rose the most in 4 1/2 years in London trading.

ValueAct has amassed less than 5 percent of Smiths, which makes everything from airport-security scanners to surgical products, said the people, who asked not to be identified because the investment isn’t yet public. It’s not clear when ValueAct began building the stake, the people said.

The holding is too small to trigger mandatory disclosures, and London-based Smiths isn’t yet a core active target, said one of the people. ValueAct, based in San Francisco, would sell the position if it decides against a longer-term campaign for changes that may benefit shareholders, the person said.

Smiths has held talks with ValueAct to discuss strategy and ideas, one of the people said.

Smiths climbed 6.7 percent to 1,226 pence at 8:15 a.m. in London, valuing the company at 4.8 billion pounds ($7.6 billion). The stock gained as much as 7.7 percent, the biggest intraday advance since January 2011.

A representative of Smiths declined to confirm individual shareholders below disclosure levels and said the company welcomes and encourages all investors, appreciates any active interest and acts at all times in the interest of all shareholders. ValueAct declined to comment.

Rolls Stake

Rolls-Royce Holdings Plc said Friday that ValueAct had become its biggest investor with a 5.44 percent stake, weeks after the London-based airplane-engine maker hired a new CEO. ValueAct also disclosed the core activist holding that day, as required because it surpassed 5 percent.

Smiths Group said in July it hired the head of GKN Plc’s automotive division to replace departing chief executive Philip Bowman, as its oil and gas and security divisions struggle. The company in previous years rejected at least two approaches for its medical-equipment business.

ValueAct manages more than $18 billion and has influenced the direction of companies including Microsoft Corp., Sara Lee Corp., Adobe Systems Inc., Valeant Pharmaceuticals International Inc. and Motorola Solutions Inc.

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