LONDON - TI Group plc will have to sell its vast automotive division before it can make a deal to merge with UK rival Smiths Industries plc.
Smiths last week unveiled a 2 billion (E3 billion) bid for TI, a market leader in fluid transfer technology for fuel, brake and air conditioning systems.
But TI Group Automotive Systems will not be part of the deal - even though Smiths CEO Keith Butler-Wheelhouse is a former head of Saab Automobile.
The automotive unit is the largest part of TI Group's business, accounting for 42 percent of last year's 2.7 billion in sales.
In 1999, TI Group acquired Walbro Corp., a US fuel systems supplier to enhance its ability to supply complete fuel tank systems.
But a TI Group spokesman said the automotive division stood in the way of a merger with Smiths because it has a lower market value than other TI businesses.
The sale of TI Group Automotive Systems would be used to repay TI borrowings, leaving the merged company less than 500 million in debt and with the option to pursue more acquisitions.
Butler-Wheelhouse said bids for TI's automotive unit would likely range between 1.1 billion-1.45 billion (E1.8-E2.4 billion), ensuring that TI shareholders would receive some of the proceeds of the sale.
Butler-Wheelhouse said the new company would be known as SI Group. It would concentrate on four core businesses: aerospace, medical, sealing solutions and industrial equipment.