SMGZY Smiths Group PLC (PK)

By Robert Wall 

LONDON-- Smiths Group PLC on Thursday said it would boost its security business with the planned $710 million purchase of Morpho Detection from France's Safran SA amid growing demand for bolstering airport and other check points.

The U.K. technology company, which makes baggage and people scanners used at airports and other facilities, said Morpho Detection will add to its explosive detection capabilities. It also strengthens Smiths Group's position in the U.S. in providing checked baggage screening equipment, Chief Executive Andy Reynolds Smith said in an interview.

Regulators are reviewing airport security requirements in the wake of a series of terrorist attacks, including last month's bombing of Brussels Airport, which killed at least 16 people, and last October's bombing of a Russian passenger plane after departing Egypt's Sharm El Shiekh.

Officials believe a bomb was smuggled on the plane, which killed all 224 people on the flight. An Islamic State affiliate has claimed responsibility. The U.K. and Russia have suspended flights to the airport while Egypt improves security there.

Earlier this year, a bomb was brought onboard a Daallo Airlines plane departing Somalia's Mogadishu Airport. The bomb detonated during the flight, killing one person, though the crew managed to land the plane safely.

Smiths expects the detection industry to grow to GBP4.7 billion ($6.74 billion) globally by 2021 from GBP3.3 billion today. Providing scanners and similar equipment for air transport should represent about 40% of the total market.

"The threat environment for people and critical infrastructure around the world is constantly evolving and becoming more complex and sophisticated," Mr. Reynolds Smith said. "There is a lot more interest," he added, not just for airport security equipment, but also for border checks.

Smiths shares rose more than 5% in London trading.

Safran acquired the detection business in 2009 from General Electric Co. It put the unit, which had $320 million in sales last year, up for sale after determining it couldn't find synergies with the rest of its security business, Chief Executive Philippe Petitcolin said last month. Safran continues to assess the future of another security business that makes identity cards and biometric systems. Those units also could be put up for sale, the company has said.

Mr. Reynolds Smith said the Morpho purchase was the company's largest deal in about a decade and would help bolster the company's position in Asia, though more needed to be done to expand there.

The deal should also allow Smiths to lower supplier costs and strengthen research and development activities, the chief executive said.

The Morpho transaction is expected to close in early 2017. The company wouldn't address the market share the combined business would control pending the antitrust review. If regulatory hurdles prove too high, Smiths Group said it can walk away from the deal for a $40 million termination fee owed to Safran.

Rory Gallivan contributed to this article.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

April 21, 2016 06:34 ET (10:34 GMT)

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