Smith & Nephew CEO Olivier Bohuon is now publicly allaying rumors the company may consider a merger or sale to another medtech giant in the near future, according to a report from The Telegraph.
London-based Smith & Nephew has been the target of several takeover rumors over the past several months, including medical device giants Medtronic and Stryker as potential suitors. However, Medtronic recently acquired S&N competitor, Covidien, and Stryker CEO Kevin Lobo backed down when asked if his company would be willing to make an offer.
Both Medtronic and Stryker are based in the United States, but following the medical device excise tax, U.S.-based companies are increasingly acquiring overseas companies and relocating their headquarters. Medtronic is one of the most recent companies to announce overseas plans — Covidien is based in Ireland and Medtronic announced plans to move headquarters along with the acquisition — but the transaction hasn't been approved yet and shareholders from both companies are suing to derail the deal.
Stryker has made a few smaller acquisitions this year — including Small Bone Innovations — and last year acquired MAKO Surgical. However, the company's recent financial report was lackluster and the Zimmer-Biomet merger announced earlier this year, if approved, would make Zimmer a serious competitor in the orthopedic device space.
In the Telegraph article, Mr. Bohuon criticized these "mega-mergers," acknowledging that consolidation is expected as the market matures, but feels many of the moves today are defensive instead of offensive and focused on making money instead of advancing strategy. As for Mr. Bohuon, his focus is on updating Smith & Nephew's offerings to accommodate for the cash squeeze in healthcare today.
According to the report, the company plans to offer a "light touch" approach to hospitals and payers, providing just the device without added supply chain management services and company technicians, as was previously the standard. The new strategy began in the United States and could spread to Europe.
Before this news was released, Sanford C. Bernstein restated their "outperform" rating on Smith & Nephew shares, according to a Watch List News report, and several other analysts have commented on the stock. Panmure Gordon reinterated a "hold" rating last week and Morgan Stanley reinterated an "overweight" rating earlier this month. Smith & Nephew plans to release second quarter financial report on Friday, with additional details on the company's new strategy going forward, and many are waiting in the rafters to see what happens next.
The company opened at $88.24 per share on July 29 with a market cap of $15.7 billion. The company's 52-week high is $100.90. The company continues to attract acquisition rumors, but if any serious offer comes knocking Mr. Bohuon said ultimately the shareholders would be a key component of the decision-making process.