Updated August 31 at 10:33 a.m. with response from Smith & Nephew
There’s renewed talk across the pond that Stryker Corp. (NYSE:SYK) is once again in the running to buy Smith & Nephew plc (NYSE:SNN), with one prominent U.K. analyst casting doubt on such a deal clearing U.S. anti-trust hurdles.
SNN shares spiked nearly 5 percent on Wall Street this morning to $51.20 as of about 10:20, after gaining 3.9 percent yesterday on the London exchange, where shares of the British orthopedics and health products giant closed at £5.97, or about $9.74.
Four U.K. news outlets spurred the gain with reports that Kalamazoo, Mich.-based Stryker is mulling an £8.50-per-share offer, which would be about $13.87 at today’s exchange rate – or a 42.4 percent premium over yesterday’s close in The City.
Rumors that Smith & Nephew is in play began surfacing late last year, with possible suitors Johnson & Johnson (NYSE:JNJ) and Biomet Inc. in the mix. But a combination of that scale isn’t likely to pass muster with U.S. anti-trust regulators, cautioned one prominent U.K. analyst.
"We believe an acquisition of Smith & Nephew by Stryker or Johnson & Johnson would not be cleared by the U.S. anti-trust authorities because the combined market shares of the hip and knee implant businesses would be anti-competitive," wrote Justin Smith of MF Global. "In our view the extent of the divestments which would be required for the deal to be cleared by anti-trust would also compromise the strategic rationale of an acquisition because the synergies would be so limited."
“We just don’t comment on this sort of market rumor,” Smith & Nephew spokesman Phil Cowdy told MassDevice this morning. “It’s a perennial thing and we just stick to our policy of not commenting.” U.K. SNN spokesman Jon Coles declined to comment to Bloomberg, according to the news service, with U.S. spokesman William Price saying the company doesn’t comment on rumor or speculation.
British newspapers The Guardian, The Independent, The Daily Mail and The London Times all reported today that offers for SNN could be in the £8.50 to £9 range. The Daily Mail said Biomet’s bid could reach the upper range, citing "hot gossip" among traders, according to Bloomberg. Stryker’s possible £8.50 tender was put down to a "reheated rumor" by The Times, according to the news service.
A deal by Biomet would be a reversal for the British firm, which lost out to a consortium of private equity firms in 2006 in its pursuit of Biomet. Blackstone Group LP, KKR & Co., TPG and the buyout arm of Goldman Sachs Group Inc. closed their $46-per-share, $11.4 billion deal for Biomet four years ago this coming November.
Smith & Nephew’s shares also benefited from a Deutsche Bank decision to initiate coverage of the stock with a “Buy” rating.