Smith & Nephew Completes ArthroCare Takeover

London-based Smith & Nephew, which has lately had the financial markets in a tizzy over rumors of an impending takeover by Stryker Corp., has announced that it has completed its own takeover, of ArthroCare Corp. (Austin, TX).

The deal, originally announced in early February, gains Smith & Nephew a highly complementary sports medicine portfolio for a purchase price of $48.25 per share, which translates into a total of about $1.5 billion. For that price, Smith & Nephew will gain ArthroCare's patented Coblation technology, a radio frequency technique that dissolves target tissue with minimal damage to surrounding healthy tissue. This provides surgeons with an alternative to Smith & Nephew's strong mechanical blade portfolio.

And speaking of synergies, Smith & Nephew is a major player in hip and knee replacements while one of ArthroCare's specialties is shoulders and other soft-tissue surgeries. And although ArthroCare has good market penetration in the States, Smith & Nephew is strongest in international markets. For the sales teams of the newly combined company, an expanded product portfolio will lead to increased cross-selling opportunities.

Additionally, ArthroCare has an ear, nose, and throat (ENT) business that will provide new growth opportunities, including  the ability to expand this business into Smith & Nephew's global markets.and the potential to utilize the combined company's technological expertise to develop the product range further.

Of course, everyone is optimistic on their wedding day. Olivier Bohuon, CEO of Smith & Nephew, said, "The acquisition of ArthroCare is a compelling transaction that accelerates our strategy to rebalance Smith & Nephew towards our higher growth segments.  Its technology and highly complementary products will significantly strengthen our portfolio, and we will use our global footprint to drive substantial new revenue growth. We are pleased to welcome ArthroCare's employees to Smith & Nephew and look forward to the further development and expansion of our combined business."

Still, we wonder if the thought of this acquisition and soon-to-happen assimilation might have been one of the reasons that Kevin Lobo, Stryker's CEO, decided to hold off a bit on making an offer. After all, both at the dinner table and at the boardroom table, too much gobbling too quickly can lead to indigestion.

Stephen Levy is a contributor to Qmed and MPMN.