Oct 23 (Reuters) – Smith & Nephew held merger talks with Johnson & Johnson to combine with the US group’s orthopaedics division but discussions collapsed after a disagreement over who would run the enlarged company, the Financial Times reported on Friday, citing people familiar with the matter.
Merger talks were at an advanced stage, with both companies aligned on the main financial terms and transaction structure, but fell through at the last minute after Smith & Nephew refused to agree to its former CEO Namal Nawana leading the merged business, the report said.
The British medical devices firm had approached J&J earlier this year with an offer that would have valued J&J’s hip and knee replacement unit at as much as $22 billion, almost double Smith & Nephew’s £9.4 billion ($12.58 billion) market capitalisation, the report said.
A Smith & Nephew spokesperson declined to comment on the report. J&J also declined to comment on the report.
“The combination would have created a rich portfolio across knee and hip implants, while filling in musculoskeletal gaps in both parties’ offering,” said John West, global head of analysis at Mergermarket.
MANAGEMENT DIRECTION AND TERMS
Nawana led Smith & Nephew for 18 months before stepping down as CEO in 2019.
He is currently heading J&J’s orthopaedics division. He was the US drugmaker’s choice to lead the merged group, but Smith & Nephew insisted that its present CEO Deepak Nath remain in charge, causing J&J’s interest to cool, the FT reported.
The companies had been eyeing a mid-October announcement for the deal before talks collapsed several weeks ago, according to the newspaper, which also said that J&J shareholders would have owned 50.1% of the combined company.
West at Mergermarket said it would not be surprising if the companies eventually returned to the negotiating table.
Smith & Nephew has been facing weak growth, and after three years of cost cuts and sales initiatives, it is banking on newer products to shore up revenue.
J&J in October last year announced plans to separate the orthopaedics business into a standalone company named DePuy Synthes. The unit, which was reportedly seeking a $20 billion price tag, has since drawn private equity interest, but no deal has materialised yet.
Last week, J&J said it was leaning towards a spin-off of the unit, with a separation targeted for mid-2027.
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(Reporting by Yamini Kalia, Pushkala Aripaka and Atharva Singh in Bengaluru; Editing by Mrigank Dhaniwala and Susan Fenton)
