Subject: Fwd:>>>Smith & Nephew to be acquired? Stryker most likely buyer
Smith & Nephew to be acquired? Stryker most likely buyer
In this pre-event note we try to answer the following:
1. Why would Stryker acquire and indeed pay a hefty premium for Smith& Nephew? and
2. What that premium would look like?
Around Christmas (late December), rumours linked Stryker to Smith&Nephew.
Such rumours have been ongoing for years BUT we show in our note how market shares have changed and Stryker is in need of acquisitions. Smith&Nephew is a very good fit.
January is the busiest month for Smith Nephew executives as they devote time to their FY report (Due Feb 5th).
We suggest that Q1 and in particular February is a key month for a formal approach if one is to be made because excecutive time is available for due dilligence meetings and because the bidder would want to work with the recent set of audited accounts (February) given the size of the acquistion.
We conduct several valuation analyses including comparable company analysis, precedent transaction analysis and DCF modelling. We also analyse prior synergies when mergers occur in the sector
We conservatively conclude thatStryker may need to offer in excess of 1350p per Smith&Nephew share for the offer to be considered full value.
And if a formal bid comesforth other suitors may also have a look
SN/ LN: Current share price: 1190p
Potential offer price: 1350p
Spread
Gross potential 160p
% upside potential 13.5%
PDF attached