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Smiths shares up on report U.S. activist ValueAct takes stake

Aug 4 (Reuters) - Smiths Group Plc (Other OTC: SMGKF - news) shares rose as much as 8 percent on Tuesday after a report said that U.S. activist investor ValueAct had taken a stake in the British engineering company.

ValueAct, a hedge fund led by Jeff Ubben, had taken a stake in Smiths but had not yet decided whether its stake would become one of its core positions, the Financial Times reported on Monday quoting sources. (http://bit.ly/1SWRfze)

However, a source close to the matter told Reuters that ValueAct had held a stake in Smiths for a while. The source did not specify when the stake was originally purchased and what ValueAct's current holding stood at.

ValueAct, which played a key role in shaking up Microsoft (NasdaqGS: MSFT - news) Corp's management, tends to become one of the largest independent shareholders at each of its core investments and run campaigns to shake up the company while seeking board representation.

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San Francisco-based ValueAct could not be reached for immediate comment outside of regular business hours.

The fund has not had to formally disclose its holding in Smiths, a maker of industrial seals, medical devices and security detectors, as its stake is below the 5 percent compulsory threshold set by the London Stock Exchange (Other OTC: LDNXF - news) .

ValueAct recently said it had taken a 5.44 percent stake in engine maker Rolls-Royce Holdings Plc, stepping up pressure on the company following a series of profit warnings.

Activist investors have been taken a keener interest in European stocks. Investors in UBS (NYSEArca: FBGX - news) , John Menzies (LSE: MNZS.L - news) , Alliance Trust and DMG Mori Seiki (Frankfurt: GILV.F - news) have sought spin-offs or board changes in the recent months.

ValueAct views Smiths' medical devices unit and its John Crane (NYSE: CR - news) seals unit as potential M&A targets, the FT said.

Smiths, who is set to welcome a new chief executive in September, has twice tried to sell its medical unit.

The company has been struggling with weak demand, a slump in demand from commodity customers and a cut in government spending. In response it has restructured to trim costs and streamline its operations.

As of Monday's close, Smiths was trading at about a 17 percent discount to what StarMine estimates as its intrinsic value, the level the stock should trade at based on its most likely growth trajectory over the next five years. (Reporting by Esha Vaish in Bengaluru; editing by Jason Neely)