Smith & Nephew and Johnson & Johnson Orthopaedics Merger Talks Collapse Over Leadership Dispute
Merger negotiations between British medical devices manufacturer Smith & Nephew and Johnson & Johnson’s orthopaedics division collapsed over a disagreement regarding who would manage the combined enterprise, according to a person familiar with the matter speaking to Reuters on October 23. The discussions had reached an advanced stage, with both companies aligned on core financial terms and structure before falling apart over executive leadership.
Advanced Financial Alignment Derailed by Executive Disagreement
The proposed transaction would have established a major portfolio spanning knee and hip implants while filling musculoskeletal product gaps for both organizations, according to John West, global head of analysis at Mergermarket. Under the discussed framework, Johnson & Johnson shareholders would have owned 50.1% of the combined group, and Smith & Nephew had approached Johnson & Johnson earlier in the year with an acquisition proposal valuing the U.S. drugmaker’s hip and knee replacement unit at up to $22 billion. That valuation was nearly double Smith & Nephew’s £9.4 billion ($12.58 billion) market capitalization, as reported by the Financial Times.
Talks broke down at the final hour because Smith & Nephew rejected the appointment of Namal Nawana to lead the enlarged business. Nawana served as Smith & Nephew CEO for 18 months before stepping down in 2019 and currently heads Johnson & Johnson’s orthopaedics division. While Johnson & Johnson selected Nawana to helm the merged entity, Smith & Nephew insisted that its current CEO, Deepak Nath, remain in charge, causing Johnson & Johnson’s interest to cool, according to the Financial Times.
Johnson & Johnson Plans DePuy Synthes Spin-Off by 2027
Both Smith & Nephew and Johnson & Johnson declined to comment on the merger discussions. Smith & Nephew has faced weak growth and relied on multi-year cost-cutting measures and sales initiatives while banking on newer products to lift revenue. Meanwhile, Johnson & Johnson announced plans a year ago to separate its orthopaedics business into a standalone company named DePuy Synthes. That unit previously sought a $20 billion valuation and drew private equity interest without finalizing a deal. Johnson & Johnson stated it is leaning toward a spin-off of the unit, targeting completion by mid-2027. Despite the collapse of the merger talks, Mergermarket’s West noted that a return to the negotiating table remains a possibility.
Frequently Asked Questions About the Terminated Merger Talks
When did the merger negotiations take place?
The companies held discussions earlier in the year and eyed a mid-October announcement before the talks ended several weeks prior to the public disclosure on October 23.
What valuation was placed on the Johnson & Johnson orthopaedics unit?
Smith & Nephew’s approach valued Johnson & Johnson’s hip and knee replacement unit at up to $22 billion, which is nearly double Smith & Nephew’s £9.4 billion ($12.58 billion) market capitalization.
What is Johnson & Johnson’s current timeline for its orthopaedics business?
Johnson & Johnson announced a target separation date of mid-2027 for the standalone orthopaedics company, named DePuy Synthes.
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