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S and N in USD1.7bn sport injury buy

Monday, February 03 11:48:56

Britain's Smith and Nephew is to buy ArthroCare for an agreed $1.7 billion in cash to strengthen its treatments for sporting injuries, an area growing faster than its main replacement hips and knees business.

Smith and Nephew (S and N) said today it would pay $48.25 a share, a 20 percent premium to the average share price of Austin, Texas-based ArthroCare over the past 90 days.

S and N Chief Executive Olivier Bohuon said revenues at the British firm's sports medicine business were currently growing by a high single-digit percentage, compared with a low single-digit for replacement hips and knees.

"We wanted to acquire in high-growth businesses and sports medicine is definitely one of them," he said, adding ArthroCare's expertise in treating shoulder joints would complement S&N's strength in knee surgery.

ArthroCare, which had net sales of $368 million in 2012, also comes with an ENT (ear, nose and throat) franchise that can be developed outside the United States, Bohuon said.

Mick Cooper, analyst at Edison Investment Research, said: "The acquisition of ArthroCare makes clear strategic sense; it makes the company a leader in sports medicine and expands its reach into the ENT market, thereby improving its long-term growth prospects."

S and N shares, which have risen by 9 percent in the last three months, were up 1.1 percent to 885.5 pence at 1120 GMT, valuing the group at about 7.8 billion pounds.

The deal, which is backed by ArthroCare's board and One Equity Partners, its largest shareholder with 17 percent, will add about $85 million to S and N's annual trading profit in the third full year after the deal closes, the British firm said.

Including the cash on ArthroCare's balance sheet, S and N said the acquisition would cost it a net $1.5 billion, financed from its debt facilities and cash balances.

Sports medicine typically involves non-invasive surgery to repair soft tissue in injuries sustained on the playing field. (Reuters)