While spinning out its orthopedics division into a solo player would’ve launched one of the largest operators in the sector alone, Johnson & Johnson (NYSE: JNJ) was reportedly looking to give it a leg up by combining its DePuy Synthes business with Smith+Nephew (NYSE: SNN) in a multibillion-dollar merger.
But those plans stumbled before the finish line, according to a report from the Financial Times, as the two couldn’t come to terms on who would lead the new $34 billion company.
The report said anonymous sources described the talks as nearing completion and that there were agreements on the financial terms, but J&J — whose shareholders would’ve owned 50.1% of the enterprise — wanted its orthopedics head Namal Nawana to become CEO.
Nawana is no stranger to Smith+Nephew, after serving as its chief for about 18 months through late 2019. Nawana was tapped by J&J to lead DePuy Synthes in 2025, with his appointment announced the day it first put forward plans to separate the business.
Smith+Nephew, however, wanted to see its own CEO, Deepak Nath, carry the torch. According to the FT, Smith+Nephew chair Rupert Soames, who would have led the future board as well, said the point was non-negotiable.
The report said the total value of the proposed transaction could have reached $22 billion, almost double Smith+Nephew’s $12.6 billion market cap, with an announcement slated for this month before the deal fell apart several weeks ago.
Earlier this year Bloomberg said J&J was pursuing potential deals north of $20 billion, while reporting last month that it was also negotiating with Apollo Global Management to sell all or part of the unit.
But most recently, on J&J’s third-quarter earnings call last week, CFO Joseph Wolk said the company was now considering a spin as the businesses’ top choice.
“I am really proud of the team working to evaluate all separation vehicles and all options are better positioned today than when we announced our intentions with this business,” Wolk said on a Oct. 13 call with investors.
“Given the way DePuy Synthes is performing and the momentum Namal Nawana and his team are generating, we are leaning towards a spin as being the best option to create long-term value for Johnson & Johnson shareholders.”
