The United Kingdom Competition & Markets Authority (CMA) issued a statement of concern over the impact of the purchase of Wright Medical (NSDQ:WMGI) by Stryker (NYSE:SYK).
CMA believes that, should the $4.7 billion acquisition go through, it would have a “negative impact on vulnerable patients in the U.K. who need ankle replacements,” according to a news release.
After a Phase 1 investigation, the CMA observed that the purchase would result in the merged entity obtaining a share of over 90% in the total ankle replacement prostheses market in the U.K., leading to concerns over a lack of competition from other suppliers and potentially higher prices or fewer choices for hospitals and their patients.
CMA launched a probe into the acquisition in May, saying it will decide by July 15, 2020,if it will launch the second phase of its investigation. It now says Stryker and Wright have until July 7 to address its concerns through the offer of undertakings in lieu of a Phase 2 reference. If the concerns go unaddressed, the deal will be referred for an in-depth Phase 2 investigation.
“The CMA is concerned that this merger and the resulting reduction in competition could lead to worse outcomes for hospitals and patients,” CMA senior director Joel Bamford said in the release. “The companies are the two major producers of vital medical products for vulnerable people suffering from serious degenerative conditions such as arthritis.
“Healthy competition in the medical technology market is central to continued innovation and improvements in patient treatments.”
Stryker announced its acquisition of Wright Medical in November 2019. Since then, the FTC increased its scrutiny of the proposed merger in January and a Wright Medical shareholder filed a proposed class-action lawsuit to block the acquisition later that month, in addition to the probing in the U.K.
In May, Stryker announced that it entered into an underwriting agreement in connection with a $2.3 billion offering set to finance the acquisition. Earlier this week, the company announced that it extended the offering period of its cash tender offer for all outstanding shares of Wright.