Here’s why ICU Medical is up about 35% on Wednesday morning

Shares of ICU Medical Inc (NASDAQ: ICUI) jumped 35% on Wednesday morning as the California-based company said it will buy Smiths’ medical division for $2.4 billion.

Smiths Group plc (LON: SMIN) is also up about 4.0% in the stock market today.

ICU trumped a previous offer from TA Associates

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The announcement comes a month after Smiths already agreed to sell its division that makes medical devices, including catheters, to TA Associates (private equity firm) for $2.0 billion. This morning, however, a superior offer from ICU Medical made it withdraw from its deal with TA Associates.

The $2.0 billion offer from the private equity firm was below market expectations and fuelled a 4.0% decline in Smiths’ stock in mid-August. TA is yet to make an official comment on the news.

Bringing Smiths’ medical division under its umbrella, ICU Medical intends to establish itself as a leading infusion therapy company. Its CEO Vivek Jain said in a press release:

“The combination of these two businesses makes sense for the medical device marketplace and fits well with ICU Medical’s existing business as it simplifies customer workflows and adds significant value and choice.”

The deal is expected to close in H1 of 2022

The agreement with ICU that is yet to receive regulatory and shareholder (Smiths) approval is expected to complete next year in the first half. The new deal, as per Smiths, will result in about $1.85 billion worth of initial net proceeds. It intends to return 55% of the proceeds to shareholders via a stock repurchase.

Smiths will also secure approximately $500 million worth of ICU’s newly issued shares and the right to appoint one director to the U.S. company’s board. Upon completion of the deal, it will own roughly 10% of ICU Medical.