LONDON (Reuters) - British engineering company Smiths Group (>> Smiths Group plc) is in early-stage talks on a sale of its medical division which could raise more than 2 billion pounds, a source familiar with the situation said on Thursday.

The firm began investigating a possible disposal after an approach from U.S. healthcare group CareFusion (>> CareFusion Corporation), the source said, confirming a report on the Financial Times website.

There has been no decision to sell, nor any agreement on price, the source added.

Smiths Group declined to comment when contacted by Reuters.

Smiths Medical, which contributed 35 percent of the company's operating profit last year, supplies equipment to hospitals and emergency services. Most of its products are manufactured in the United States, Britain, Mexico and Italy.

In 2011, Smiths rejected a 2.45-billion-pound offer from private equity group Apax for the division, saying it was not in the best interests of shareholders.

Shares in the company closed up 3.6 percent and were among the top FTSE 100 <.FTSE> gainers after the FT report.

Demand to trade the stock was strong in late deals and it ended the day as the fourth-most traded stock, at more than 1-1/2 times its 90-day daily average volume.

(Reporting By Christine Murray and Simon Jessop; editing by Tom Pfeiffer)

Stocks treated in this article : CareFusion Corporation, Smiths Group plc