Speculation swirls about possible S&N takeover

Smith & Nephew is sure sparking some interest. Shares of U.K.-based company rose 9.5 percent earlier this week after reports surfaced of an unsolicited takeover interest by Johnson & Johnson that valued the company at as much as £7.5 billion ($11.7 billion), according to the Wall Street Journal. S&N reportedly turned down that offer that came last month.

After neither company issued a statement regarding the bid, however, S&N stock lost ground. However, the stock recovered a bit after Credit Suisse said a J&J-S&N combo could very well be in the cards: "While other industry combinations also make sense, we see the chances of a tie up with J&J as the highest. This is due to its relatively strong financial capacities. In addition, Johnson & Johnson and Smith and Nephew are competitors in all segments Smith and Nephew is present in. Hence the synergy potential is the largest among those two companies and hence the value of Smith and Nephew should be the highest to Johnson & Johnson. This should ensure that Smith and Nephew gets the highest available price."

"Speculation has been going on for 10 years," said S&N CEO David Illingworth at the JP Morgan Healthcare Conference in San Francisco, as quoted by Bloomberg. The orthopedic industry will undergo some consolidation, Illingworth added, and his company will be on the lookout for purchases that add to its current business line. Consolidation is likely to raise antitrust issues, he explained.

Indeed, as Bloomberg notes, there could be some antitrust issues with a tie up between S&N and J&J--or rivals Stryker and Zimmer for that matter. Lisa Clive, an analyst at Sanford C. Bernstein said a link-up with Biomet, a Warsaw, Indiana-based implant maker, is more likely.

- get more from the WSJ
- read the Gurardian story
- see this from Bloomberg

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