Britain’s Smith & Nephew is to buy ArthroCare for an agreed $1.7 billion in cash to strengthen its treatments for sporting injuries, an area growing faster than its main replacement hips and knees business.
Smith & Nephew (S&N) said yesterday it would pay $48.25 a share, a 20 per cent premium to the average share price of Austin, Texas-based ArthroCare over the past 90 days.
S&N chief executive Olivier Bohuon said revenues at the British firm’s sports medicine business were currently growing by a high single-digit percentage, compared with a low single-digit for replacement hips and knees.
The deal comes just weeks after ArthroCare signed an agreement with the US Department of Justice to resolve a six-year long investigation regarding allegations of securities and related fraud committed under a previous management team.
ArthroCare, which had net sales of $368 million in 2012, comes with an ENT (ear, nose and throat) franchise that can be developed outside the US, Bohuon said.
Mick Cooper, analyst at Edison Investment Research, said: “The acquisition of ArthroCare makes clear strategic sense; it makes the company a leader in sports medicine and expands its reach into the ENT market, thereby improving its long-term growth prospects.”
S&N shares, which have risen by 9 per cent in the last three months, closed up 1.1 per cent to 886 pence yesterday, valuing the group at about £7.8 billion. Shares in ArthroCare were up 7.3 per cent to $48.70 at 1654 GMT.
The deal, which is backed by ArthroCare’s board and One Equity Partners, its largest shareholder with 17 per cent, will add about $85 million to S&N’s annual trading profit in the third full year after the deal closes, the British firm said.
Including the cash on ArthroCare’s balance sheet, S&N said the acquisition would cost it a net $1.5 billion, financed from its debt facilities and cash balances. – (Reuters)
