Two factors have increased speculation that Smith & Nephew may be ready for a takeover.
Two factors have increased speculation that UK-based medical device company Smith & Nephew may be ready for a takeover.
First, the company notified investors that its chief executive officer, Olivier Bohoun, plans to retire at the end of the year.
The second is unconfirmed reports that Elliott Management Corp., an activist investor, took a stake in the company.
Mike Matson, an analyst with Needham & Co. wrote in a note to investors this week, “We believe the two events might be related and that they likely signal a change in strategy that could include selling the company.” He further listed two potential buyers as Stryker and Medtronic, citing a possible 35 premium to Monday’s closing price.
MDDI Qmed wrote, “For Stryker, Matson said an acquisition of Smith & Nephew would increase Stryker’s scale, market share, international presence, and would be significantly accretive to the company’s earnings. He estimated that an acquisition of Smith & Nephew would make Stryker the market leader in the reconstructive hips and knees segment, and in sports medicine. It would also significantly bolster the company’s number two position in the trauma space, and bump the company to the number two spot in advanced wound care.”
On the other hand, if Medtronic were the buyer, it would also increase scale, product breadth and be mostly accretive to earnings. It would strengthen Medtronic’s orthopedics offerings, which are currently focused on the spine. If Medtronic bought Smith & Nephew, it would become the fourth largest company in the reconstructive device market, second in sports medicine, fourth in trauma, and likely place second in advanced wound care. There aren’t many overlaps between Medtronic and Smith & Nephew.
Another big player that would be a potential buyer is Johnson & Johnson, but Matson thinks it’s unlikely because J&J already has plenty of exposure in orthopedics and there would be likely antritrust issues in the trauma arena.
On June 29, Smith & Nephew launched its NAVIO handheld robotics-assistsed total knee arthroplasty (TKA) application. The system is a next-generation handheld robotics platform that helps surgeons with implant alignment, ligament balancing and bone preparation.
Which at least brings up the possibility of interest from surgical robotics companies, such as Intuitive Surgical, which manufactures the da Vinci Surgical System. Other robotic surgery companies include TransEnterix, Medrobotics, Verb Surgical, which is a joint venture of Google’s Alphabet and J&J, Hansen Medical, Medtech, TITAN Medical, and Microbot Medical.
One advantage for both Stryker and Medtronic, according to Matson, is both companies would gain access to offshore funds that are currently trapped there. He notes that either of the companies could potentially use that money to fund the deal. Stryker has about $3 billion of its $4 billion trapped outside the U.S., and Medtronic, currently based in Ireland, has about $6 billion of its $13 billion in cash trapped outside the U.S.
Smith & Nephew has around 15,000 employees and a presence in more than 100 countries. In 2016, annual sales were approximately $4.7 billion.
