Smith & Nephew's ($SNN) $1.7 billion bid for ArthroCare ($ART) may be too low, and some analysts predict that interested rivals will swoop in with a higher offer as a result, Bloomberg reports.
The U.K. orthopedics and wound care device giant is bidding $48.25 a share to buy the company, which specializes in sports medicine joint repair and recently settled long-standing federal fraud charges in the U.S. But the stock closed Feb. 5 at $49.50, and also closed higher than the S&N bid the day before. This is where it gets complicated. While the offer is at a premium--a price ArthroCare's stock hadn't hit in a few years--analysts cited by Bloomberg said the market is looking for a higher bid.
William Blair & Co. sees Stryker ($SYK) and Johnson & Johnson ($JNJ) as likely counter-bidders, Bloomberg said. An analyst at Canaccord Genuity Group agreed, telling the news agency that either company might want to forward a higher bid to snatch up ArthroCare, which is a major player in developing sports-medicine related coblation treatments, an option that helps get rid of damaged tissue but leaves healthy tissue alone. And JPM Group predicts ArthroCare could sell for as much as $55 a share because sports medicine is big business and can grow internationally, according to the story.
Zimmer is ($ZMH) is also viewed as a potential bidder, analysts from Cannacord Genuity and JPM Group told Bloomberg.
Will Smith & Nephew get outbid, or forced to up its offer? Speculate away. There is some chance either could happen, the story noted, because ArthroCare's technology is relatively unique in the device world. But Smith & Nephew, Stryker, J&J and Zimmer all declined to comment to Bloomberg.
This sale means a lot to Smith & Nephew. The company has struggled with a slump in its traditional orthopedic device product lines, and has subsequently focused on diversifying and expanding its wound care and sports medicine offerings. Texas-based ArthroCare could fit well with Smith & Nephew's broader strategy, if its M&A bid succeeds.
- read the Bloomberg story