Smith & Nephew pays £1bn for US group

Smith & Nephew said it would pay $48.25 (£29.51) a share in cash for ArthroCare, representing a 20 per cent premium over the 90-day average price of the Austin, Texas-based company.

Smith & Nephew’s chief executive Olivier Bohuon said it was a “compelling opportunity” to add ArthroCare’s products and technology to its sports medicine unit, one of the faster growing parts of the business.

Mr Bohuon said the US company’s expertise in treating shoulder joints will complement Smith & Nephew’s strength in knee surgery.

He said that its radio-frequency technology for use in non-invasive surgery would also be combined with its Smith & Nephew’s mechanical blade portfolio to give surgeons more choice.

Including the cash on ArthroCare’s balance sheet, Smith & Nephew said the acquisition would cost it a net $1.5bn (£918m), which will be financed from its debt facilities and cash balances.

Analyst Savvas Neophytou, at Panmure Gordon, said: “Although investors may worry that the bid is insufficient (it represents only six per cent premium to Friday’s close), we note a spike in the target company’s share price on January 7 and the change of control premium is closer to 20 per cent compared to the 90-day VWAP.

“It may still flash out another bid, which would be problematic, but at the price the transaction makes sense to us as it will be accretive from 2015 onwards. Today’s acquisition appears to be consistent with management strategy and will be financed from existing resources.”

Mick Gilligan, head of research at Killik & Co, said: “The deal fits well with the group sports medicine business and will generate revenue and cost synergies and will be accretive to EPS from the first full year.

“The two companies already have licensing and supply arrangements together.

“The deal is recommended and will be financed from existing cash and debt, but unsurprisingly the buyback is being halted.”

Smith & Nephew was founded in Hull, where it still has its advanced wound management business.