Smith & Nephew is the UK’s largest listed medical equipment company and is known for its hip and knee implants. The group has been moving into higher growth areas and undertaken a number of acquisitions. Smith & Nephew has long been viewed as a takeover candidate with Stryker recently showing interest.
In 2011 Smith & Nephew teamed up with Billie Jean King to highlight the impact of her double knee replacement. The former tennis world No. 1 stated in a press release that: “I feel like I’m 20 again, and I’m back on the courts playing tennis.”
Ms King benefited from Smith & Nephew’s Legion knee with VERILAST Technology. At the time this was the only technology tested for 30 years of wear performance and as such was expected to provide 30 years of active mobility.
With an ageing global demographic demand for hip and knee replacements is set to increase. Smith & Nephew is also benefiting from increased demand in emerging markets and a strategic shift towards higher growth areas.
Smith & Nephew’s growth drivers
Source: Smith & Nephew investor presentation
Healthcare can be an attractive area to invest, as it is defensive and healthcare spending increases over time. However, pharmaceutical & biotech firms have drug development uncertainty and are faced with ongoing patent expirations.
The healthcare equipment & services sector offers a lower risk way to obtain healthcare exposure. Smith & Nephew is the UK’s largest listed medical equipment group, with a £10bn market value, and was founded in Hull in 1856.
Smith & Nephew and Healthcare M&A
Smith & Nephew has been topical due to takeover interest from US rival Stryker in mid-2014. Stryker had been in the early stages of considering a takeover but was forced to abort its plans following a media leak.
Under UK Takeover Panel rules there followed a six-month period in which Stryker was unable to make an offer. This ended in December 2014 but a recent US$2bn share buy back from Stryker suggests that its interest may have waned.
The bid premium in Smith & Nephew’s shares has therefore fallen back but Stryker may return at some point. Other candidates to takeover Smith & Nephew include the US pharmaceutical giant Johnson & Johnson.
Combining with Smith & Nephew would increase Stryker’s market share in Hip & Knee Implants, Sports Medicine and Traumas &…
