Medtronic Said to Evaluate Takeover Bid for Smith & Nephew (1)
2014-06-04 18:09:49.111 GMT
(Updates with trading in fifth paragraph.)
By Matthew Campbell, Manuel Baigorri and Michelle Fay Cortez
June 4 (Bloomberg) -- Medtronic Inc., one of the world’s
largest medical-device makers, is evaluating a takeover of
London-based Smith & Nephew Plc that could see the U.S. company
move its tax domicile overseas, people familiar with the matter
said.
Smith & Nephew, with a market value of about 9.5 billion
pounds ($15.9 billion), is aware of Medtronic’s interest as are
investment banks, said two of the people, asking not to be named
discussing a private matter. Medtronic’s preparations for a bid
are at an early stage and no offer is imminent, the people said.
Medtronic is a more serious bidder for Smith & Nephew than
Stryker Corp., another U.S. maker of medical devices, said one
of the people. Last week, in response to a Financial Times
report, Stryker Chief Executive Officer Kevin Lobo said the
company was in the early stages of evaluating a bid.
The largest medical-device companies are banding together
to compete as hospitals cut costs to accommodate price pressure
resulting from the U.S. Affordable Care Act. Medical centers are
looking for only a handful of companies to provide a wide range
of products, and the leaders of both Medtronic and Johnson &
Johnson have said they are looking for scale and planning to
bundle their device offerings.
Medtronic rose 3.3 percent to $63.03 as of 2:01 p.m. in New
York. Smith & Nephew closed up 3.3 percent in U.K. trading
today. With a market value of more than $61 billion, Medtronic
had $14.2 billion in cash and equivalents at the end of April,
data compiled by Bloomberg show.
Spokesmen for Medtronic, based in Minneapolis, and Smith &
Nephew declined to comment.
Inversion Structure
The transaction would probably be structured as a tax
inversion, with Medtronic using Smith & Nephew’s corporate shell
to move its legal residence to the U.K., the people said. The
gap between the 35 percent federal tax rate and much lower
levies in some European countries is spurring such deals --
including Pfizer Inc.’s now shelved effort to acquire
AstraZeneca Plc. The U.K. has a 21 percent corporate income tax
rate.
Medtronic’s Chief Executive Officer Omar Ishrak has said he
wouldn’t rule out a tax-inversion deal.
“Strategically, we do have this current problem that we
have a lot of cash outside the U.S.,” he said in a May 20
telephone interview. “We encourage some kind of U.S. tax reform
that allows us access to that cash in a more reasonable way.”
Domino Effect
The company is looking to broaden its offerings in its
three key areas -- heart, muscle and skeleton and diabetes
products, Ishrak said.
“We intend to fill these areas out and we want to
globalize,” he said.
A purchase of Smith & Nephew, which sells implants for knee
and hip surgeries as well as for repairing traumatic injuries,
would be the latest in the $45 billion orthopedic market. J&J’s
$21.3 billion purchase of Synthes Inc. in 2012 set off a domino
effect among the half-dozen rivals that make devices to replace
hips and knees, treat sports injuries and bolster the spine.
J&J sold its global trauma business to Biomet Inc. for $280
million to win regulatory approval for the Synthes deal. Zimmer
Holdings Inc. agreed to acquire Biomet, its cross-town rival in
Warsaw, Indiana, for $13.4 billion in April.
Medtronic’s preparations were complicated by news of
Stryker’s interest, one of the people said. Smith & Nephew’s
shares have gained more than 7 percent since the May 29 report.
For Related News and Information:
Zimmer Buys Biomet for $13.4 Billion to Gain in Orthopedics
NSN N4JXLA6TTDSR <GO>
Smith & Nephew 6% Premium for ArthroCare Lures Rivals: Real M&A
NSN N0JQDV6VDKI5 <GO>
Smith & Nephew to Buy ArthroCare for $1.7 Billion in Cash (4)
NSN N0FUXM6S972M <GO>
Merger analysis: MA <GO>
Top health news: HTOP <GO>
--With assistance from Jeffrey McCracken and David Welch in New
York and Makiko Kitamura in London.
To contact the reporters on this story:
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net;
Manuel Baigorri in London at +44-20-3525-4457 or
mbaigorri@bloomberg.net;
Michelle Fay Cortez in Minneapolis at +1-612-991-8887 or
mcortez@bloomberg.net
To contact the editors responsible for this story:
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net;
Aaron Kirchfeld at +44-20-3525-8830 or
akirchfeld@bloomberg.net
Elizabeth Wollman
2014-06-04 18:09:49.111 GMT
(Updates with trading in fifth paragraph.)
By Matthew Campbell, Manuel Baigorri and Michelle Fay Cortez
June 4 (Bloomberg) -- Medtronic Inc., one of the world’s
largest medical-device makers, is evaluating a takeover of
London-based Smith & Nephew Plc that could see the U.S. company
move its tax domicile overseas, people familiar with the matter
said.
Smith & Nephew, with a market value of about 9.5 billion
pounds ($15.9 billion), is aware of Medtronic’s interest as are
investment banks, said two of the people, asking not to be named
discussing a private matter. Medtronic’s preparations for a bid
are at an early stage and no offer is imminent, the people said.
Medtronic is a more serious bidder for Smith & Nephew than
Stryker Corp., another U.S. maker of medical devices, said one
of the people. Last week, in response to a Financial Times
report, Stryker Chief Executive Officer Kevin Lobo said the
company was in the early stages of evaluating a bid.
The largest medical-device companies are banding together
to compete as hospitals cut costs to accommodate price pressure
resulting from the U.S. Affordable Care Act. Medical centers are
looking for only a handful of companies to provide a wide range
of products, and the leaders of both Medtronic and Johnson &
Johnson have said they are looking for scale and planning to
bundle their device offerings.
Medtronic rose 3.3 percent to $63.03 as of 2:01 p.m. in New
York. Smith & Nephew closed up 3.3 percent in U.K. trading
today. With a market value of more than $61 billion, Medtronic
had $14.2 billion in cash and equivalents at the end of April,
data compiled by Bloomberg show.
Spokesmen for Medtronic, based in Minneapolis, and Smith &
Nephew declined to comment.
Inversion Structure
The transaction would probably be structured as a tax
inversion, with Medtronic using Smith & Nephew’s corporate shell
to move its legal residence to the U.K., the people said. The
gap between the 35 percent federal tax rate and much lower
levies in some European countries is spurring such deals --
including Pfizer Inc.’s now shelved effort to acquire
AstraZeneca Plc. The U.K. has a 21 percent corporate income tax
rate.
Medtronic’s Chief Executive Officer Omar Ishrak has said he
wouldn’t rule out a tax-inversion deal.
“Strategically, we do have this current problem that we
have a lot of cash outside the U.S.,” he said in a May 20
telephone interview. “We encourage some kind of U.S. tax reform
that allows us access to that cash in a more reasonable way.”
Domino Effect
The company is looking to broaden its offerings in its
three key areas -- heart, muscle and skeleton and diabetes
products, Ishrak said.
“We intend to fill these areas out and we want to
globalize,” he said.
A purchase of Smith & Nephew, which sells implants for knee
and hip surgeries as well as for repairing traumatic injuries,
would be the latest in the $45 billion orthopedic market. J&J’s
$21.3 billion purchase of Synthes Inc. in 2012 set off a domino
effect among the half-dozen rivals that make devices to replace
hips and knees, treat sports injuries and bolster the spine.
J&J sold its global trauma business to Biomet Inc. for $280
million to win regulatory approval for the Synthes deal. Zimmer
Holdings Inc. agreed to acquire Biomet, its cross-town rival in
Warsaw, Indiana, for $13.4 billion in April.
Medtronic’s preparations were complicated by news of
Stryker’s interest, one of the people said. Smith & Nephew’s
shares have gained more than 7 percent since the May 29 report.
For Related News and Information:
Zimmer Buys Biomet for $13.4 Billion to Gain in Orthopedics
NSN N4JXLA6TTDSR <GO>
Smith & Nephew 6% Premium for ArthroCare Lures Rivals: Real M&A
NSN N0JQDV6VDKI5 <GO>
Smith & Nephew to Buy ArthroCare for $1.7 Billion in Cash (4)
NSN N0FUXM6S972M <GO>
Merger analysis: MA <GO>
Top health news: HTOP <GO>
--With assistance from Jeffrey McCracken and David Welch in New
York and Makiko Kitamura in London.
To contact the reporters on this story:
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net;
Manuel Baigorri in London at +44-20-3525-4457 or
mbaigorri@bloomberg.net;
Michelle Fay Cortez in Minneapolis at +1-612-991-8887 or
mcortez@bloomberg.net
To contact the editors responsible for this story:
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net;
Aaron Kirchfeld at +44-20-3525-8830 or
akirchfeld@bloomberg.net
Elizabeth Wollman