US surgical implant maker Stryker Corp. is planning a takeover offer for British medical device maker Smith & Nephew that could happen in the coming weeks, Bloomberg reported, citing people familiar with the matter.
Stryker is said to be offering a "significant premium" to Smith & Nephew's current share price, with one of the people familiar with the matter saying it could be about 30 percent. Stryker has a market capitalization of $36.55 billion, while Smith & Nephew has a market capitalization of nearly $17 billion.
Medical-device companies are looking to consolidate as hospitals and insurers demand better prices from suppliers to tame rising costs. Two large manufacturers of surgical products and medical supplies, Medtronic Inc. and Covidien Plc, are in the process of completing a merger that was announced in June. Zimmer Holdings Inc.’s agreement to buy Biomet Inc. for $13.4 billion is undergoing regulatory review.
A Stryker purchase of Smith & Nephew may be much more positive for earnings if it isn’t structured as an inversion, Morgan Stanley analysts said. A deal could be done with cash funded entirely by debt, or may be a cash and equity transaction with an estimated 85 percent in debt and 15 percent in shares, Morgan Stanley said.
Last month, Stryker was discussing the financing of a deal and potential antitrust hurdles with advisers, people familiar with the matter said.
Stryker Chief Executive Officer Kevin Lobo had said in May that the company was in early stages of evaluating a deal, prompting UK takeover rules that required the company to make an offer in 28 days or wait six months. That standstill period expired in late November.
Both companies have made several acquisitions in recent years. Smith & Nephew paid about $1.7 billion for Austin, Texas-based ArthroCare Corp. in May, adding orthopedics products used in sports medicine for minimally invasive surgery. Stryker’s deals include the purchase of Small Bone Innovations Inc. for $375 million in August, to gain ankle replacement products.
