Stryker, a U.S. producer of surgical implants, plans to offer a significant premium to Smith & Nephew’s share price, with one of the people saying it could be about 30 percent. Smith & Nephew gained as much as 9.7 percent and was up 7.4 percent at 10:39 a.m. That takes the gain this year to 36 percent and values the company at about 10.5 billion pounds ($16.3 billion).
Stryker, based in Kalamazoo, Michigan, is not planning a tax inversion because of the limited tax benefits and political risk, said one of the people, who asked not to be identified because deliberations are private. The U.S. government is clamping down on those types of deals to stop
companies from moving their addresses abroad to cut taxes.
The bid is still being finalized and the timing could change, said the people. There’s also a chance that Stryker may decide against an offer, one of the people said.
Representatives for Stryker and Smith & Nephew declined to comment. Stryker rose 1.7 percent to $96.61 at the close in New York yesterday, giving the company a market value of about $37 billion.
Stryker Corp. Chief Executive Officer Kevin Lobo had said in May that the company was... Read More
Rampant Consolidation
Medical-device companies are looking to consolidate as hospitals and insurers demand better prices from suppliers to tame rising costs. Two large manufacturers of surgical products and medical supplies, Medtronic Inc. and Covidien Plc, are in the process of completing a merger that was announced in June. Zimmer Holdings Inc.’s agreement to buy Biomet Inc. for $13.4 billion is undergoing regulatory review.A Stryker purchase of Smith & Nephew may be much more positive for earnings if it isn’t structured as an inversion, Morgan Stanley analysts said late yesterday. A deal could be done with cash funded entirely by debt, or may be a cash and equity transaction with an estimated 85 percent in debt and 15 percent in shares, Morgan Stanley said.
Last month, Stryker was discussing the financing of a deal and potential antitrust hurdles with advisers, people familiar with the matter told Bloomberg News at the time.
Stryker Chief Executive Officer Kevin Lobo had said in May that the company was in the early stages of evaluating a deal, prompting U.K. takeover rules that required the company to make an offer in 28 days or wait six months. That standstill period expired in late November.
Both companies have made several acquisitions in recent years. Smith & Nephew paid about $1.7 billion for Austin, Texas-based ArthroCare Corp. in May, adding orthopedics products used in sports medicine for minimally invasive surgery. Stryker’s deals include the purchase of Small Bone Innovations Inc. for $375 million in August, to gain ankle replacement products.
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