Is Stryker's move for Smith & Nephew imminent? 10 things to know

Spinal Tech

Stryker may soon make the long-discussed bid for Smith & Nephew in what could be another tax inversion strategy that further changes the orthopedic device landscape.

According to a Bloomberg report, the "standstill" period that would prevent Smith & Nephew Plc from making an offer on Smith & Nephew is coming close to the end.

 

Here are 10 things to know about a potential deal:

 

1. Smith & Nephew is headquartered in the United Kingdom, which means if Stryker acquired the company they could move their headquarters overseas in a similar tax inversion strategy Medtronic plans to utilize after finalizing it's acquisition of Ireland-based Covidien, expected in the first quarter of 2015.

 

2. The United States government is scrutinizing these tax inversion deals and making it more difficult for them to go through without penalties. However, according to Bloomberg sources, "an inversion strategy wouldn't be essential to make the deal work."

 

3. Stryker's pursuit of Smith & Nephew has been rumored since this past spring, but in CEO Kevin Lobo pulled back on the pursuit. Around the same time Medtronic expressed interest in Smith & Nephew. But Medtronic's association with Smith & Nephew was short lived, as a few days later the company announced plans to acquire Smith & Nephew rival Covidien.

 

4. In May, Stryker said the company wouldn't pursue a Smith & Nephew takeover for six months under United Kingdom takeover rules. That period ends this week.

 

5. Smith & Nephew stock was up 3.4 percent today, reports CNBC, after Bloomberg published their report. Traders are citing the potential acquisition as a reason why.

 

6. When the report was released, Stryker shares went up 0.3 percent.

 

7. Smith & Nephew has a market cap of $15.2 billion.

 

8. Despite the rumors and lift on Stryker's ability to pursue Smith & Nephew, an acquisition isn't a sure thing. Roadblocks for the deal, according to Barrons, include:

 

• Smith & Nephew isn't necessarily looking to sell
• The deal might not win anti-trust approval from both the United States and United Kingdom

 

9. Zimmer is still working on closing its acquisition of Biomet, and the final decision on anti-trust issues there could impact Stryker's approach to the deal.

 

10. Stryker's ability to leverage its own tax structure for Smith & Nephew's benefit is a huge swing factor for the accreditation analysis, according to Barrons.

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