Report: Stryker Making Another Push For S&N
By Jof Enriquez,
Follow me on Twitter @jofenriq
A deal for Stryker Corporation to acquire London-based orthopedic company Smith & Nephew (S&N) is reportedly in the offing. It's the latest in a series of rumors predicting a merger between the two companies seen by some analysts as most likely to combine next in the consolidated orthopedics market.
According to Street Insider, "Stryker has tabled an approximately $18 billion offer for Smith & Nephew, according to a person with knowledge of the situation. Goldman Sachs is acting as advisor, and deal talks could move quickly, the source said."
Neither Stryker nor S&N issued comments regarding the newest report that a deal is in the works.
Stryker was reportedly interested in buying S&N in May 2014, when media reports cited unnamed sources as saying that Stryker was preparing a bid. But Stryker denied its interest in response to a request from Britain's Takeover Panel. In November, after a mandatory period prohibiting new bids lapsed, Bloomberg reported that Stryker again was discussing with advisers financial terms of a deal to buy S&N, but no agreement was announced. A month later, news outlets reported that Stryker was finalizing a deal which could be completed in the next few weeks.
Device giant Medtronic also was reportedly interested in acquiring S&N – the remaining orthopedics company large enough to impact the market – before deciding to buy Covidien instead.
The orthopedics market is consolidating in reaction to a parallel consolidation by hospital systems, whose own mergers could give them more leverage in buying lower-priced implants, in bulk, from fewer manufacturers. Companies are looking to combine and integrate their offerings in a market considered to bring slim margins and less innovation than other product segments. It's the same rationale behind the $13.4 billion Zimmer-Biomet merger last year, and Johnson & Johnson’s acquisition of Synthes for $21 billion in 2012.
For Stryker, the company is playing it by ear when it comes to acquisitions. Speaking to analysts during an earnings call in April, Stryker CEO Kevin Lobo said, “We really look to strengthen our businesses and we are looking to do acquisitions. We want to strengthen our market position in the areas where we are playing today and that could be big deals, small deals or medium sized deals, but we want to make sure we are strengthening our position and encouraging our divisions to continue to drive growth."
Stryker has bought a slew of companies in the past two years, among them Berchtold Holding AG in April 2014, Small Bone Innovations (SBI) in July 2014, and CHG Hospital Beds in January 2015. Those were followed by the acquisitions of Pivot Medical In February and Muka Metal in July. Adding S&N to that purchase list could continue to prove challenging.
Speaking to the Financial Times (FT) in October, S&N CEO Olivier Bohuon reiterated his stance that S&N could successfully fend off takeover attempts and thrive independently in the consolidated orthopedics sector. “Yes we are the number four player, but the strategy is one of disruption in products and models. I don’t see any sign of weakness because of size," he told FT.