Smith & Nephew share price slides as Medtronic opts for Irish rival

By: Alice Young
Alice Young
Alice joined the Invezz team after motherhood convinced her to make a career change from actuary-ing. She brings a… read more.
on Jun 16, 2014
Updated: Apr 9, 2020

iNVEZZ.com, Monday, June 16: Shares in Smith & Nephew (LON:SN) have lost ground today, and were the biggest FTSE 100 faller in morning trade, after Medtronic Inc (NYSE:MDT) announced that it had agreed to acquire Dublin-based orthopaedic company Covidien (NYSE:COV). Medtronic had previously been reported as evaluating a bid for the FTSE 100 group.

**Smith & Nephew drops on Medtronic deal**
As of 09:42 BST, Smith & Nephew’s share price had shed 2.52 percent to 1,044.00p, the largest decline in the FTSE 100 index which currently stands 0.09 percent lower at 6,771.97 points.
Minneapolis-based Medtronic announced yesterday in a statement that it had entered into a definitive agreement to acquire Covidien in a cash-and-stock deal valued at $93.22 per Covidien share, or a total of approximately $42.9 billion (£25 billion).

The transaction came after news emerged earlier this month that Medtronic, the world’s largest standalone medical device maker, was evaluating a bid for Smith & Nephew. (Smith & Nephew share price up as new US suitor emerges)

“All things being equal, Medtronic’s pursuit of Covidien will be unhelpful for Smith & Nephew’s share price,” Tom Jones, analyst at Berenberg, told The Telegraph before the deal was announced.
The tie-up with Covidien will enable Medtronic to cut its tax bill by redomiciling to Ireland in a move known as ‘inversion’. Tax considerations have been cited as one of the reasons for Medtronic’s reported interest in Smith & Nephew, as well as for Pfizer Inc’s (NYSE:PFE) attempts to acquire UK-based AstraZeneca (LON:AZN).

**“Always the bridesmaid, never the bride”**

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The deal between Medtronic and Covidien comes amid a buzz of activity in the pharmaceuticals and healthcare sector as well as ongoing consolidation in the orthopaedics industry which in 2011 saw Johnson & Johnson (NYSE:JNJ) opt for Switzerland’s Synthes over Smith & Nephew.

The chief executive of US orthopaedic implant maker Stryker Corp (NYSE:SYK) recently admitted that his company had been in the early stages of evaluating a tie-up with the FTSE 100 group. Michigan-based Stryker, however, was forced to confirm that it was not preparing a takeover bid after speculation sent Smith & Nephew’s share price to record highs. (Smith & Nephew share price: Stryker denies bid speculation)
“I just don’t know who will buy it,” one unidentified banker told The Telegraph. “It is always the bridesmaid, never the bride.”
Berenberg’s Jones noted that Smith & Nephew had been a bid target for 46 years.
“I would not be surprised if we have to wait another 46 years,” he said, as quoted by The Telegraph.
**As of 10:18 BST, buy Smith & Nephew shares at 1045.00p.**
**As of 10:18 BST, sell Smith & Nephew shares at 1044.00p.**

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