Stryker Considering Smith & Nephew Acquisition, Again

By Jof Enriquez,
Follow me on Twitter @jofenriq

Stryker Corporation is reportedly planning a takeover bid for Smith & Nephew (S&N) now that a six-month prohibitive period under U.K. law is set to expire. S&N is currently valued at $16 billion.

Citing unnamed sources privy to Stryker’s latest plan, Bloomberg reported recently that the Michigan-based medical device company is “discussing the financing of a deal and its potential antitrust hurdles with advisers.” According to three of Bloomberg’s sources, Stryker is positioning the deal as a tax inversion that would allow it to re-incorporate from the U.S. to the U.K. where S&N is currently headquartered. The sources reported, however, that “an inversion wouldn’t be essential to make the deal work,” as there are other strategic reasons to pursue the acquisition.  

Back in May, media reports said that Stryker was preparing a bid for S&N, but Stryker denied its interest in response to a request from Britain's Takeover Panel, according to a Reuters article. The denial made Stryker ineligible to put out another offer for at least six months under a “standstill agreement,” which is a prohibitive period that is set to end on Nov. 28, per Reuters.

Medtronic Inc. was also reportedly planning its own bid for S&N, but it later decided to buy another U.K. company, Covidien, for $42.9 billion.

“Smith & Nephew never comments on speculation,” a company spokeswoman said about the recent report, according to Reuters. However, Bloomberg’s sources said that S&N is aware of the renewed interest from Stryker.

London-based S&N, a maker of joint replacement implants, has long been a target for bigger medical device companies. The company’s chief executive Olivier Bohuon said in August that it could remain independent for the foreseeable future despite the recent wave of consolidation in the industry, per Reuters.

Under pressure from healthcare clients that are looking to slash costs, U.S.-based medical device companies have sought inversion opportunities to move abroad for lower taxes. Such tax inversion tactics have drawn the ire of U.S. officials, and the Treasury Department recently introduced new rules to discourage inversions.

Despite the measures, companies are going ahead with tax inversion deals, albeit with restructured financing plans. In particular, Medtronic is taking out a $16 billion loan to fund the Covidien acquisition. Meanwhile, U.S.-based Wright Medical Group and Netherlands-based Tornier are merging in a $3.3B inversion, and Ohio-based Steris Corporation recently entered into a $1.9 billion inversion deal with England-based Synergy Health.