Smith & Nephew: Thoughts on recent M&A speculation
Opco notes that MDT & SNN shares were higher yesterday following a Bloomberg article indicating that MDT is evaluating a takeover bid for UK-based orthopedic company SNN. This comes one week after reports that SYK was considering a SNN bid. Firm thinks that an MDT/SNN deal would have fewer potential "dis-synergies" and less scrutiny from anti-trust regulators than SYK/SNN; also, MDT/SNN would provide MDT bundling opportunities with its spine business and more flexibility for future use of MDT's large outside-US cash balance. However, the transaction would not provide obvious significant cost synergies. With SNN trading above the level of the pending ZMH/Biomet deal, the ultimate tax benefits would be key. Firm expects the topic to be discussed at today's MDT Analyst Day in NYC, particularly if MDT does not comment ahead.