Smith & Nephew buys ArthroCare Corp

3rd Feb 2014 07:22

Medical technology company Smith & Nephew has agreed to buy medical device company ArthroCare Corp.The group will pay $1.7bn, or $48.25 per ArthroCare share in cash, representing an enterprise value of $1.5bn. Smith & Nephew said the business will boost revenues as it complements its existing portfolio, particularly in knee repair innovations."This is a compelling opportunity to add ArthroCare's technology and highly complementary products to further strengthen our sports medicine business," said Chief Executive Oliver Bohuon."Together, we will be able to generate significant additional revenue from the more comprehensive portfolio, combined sales force and Smith & Nephew's global footprint. With this transaction, we are again accelerating our strategy to rebalance Smith & Nephew towards higher growth." ArthroCare focuses on soft tissue repair and ablation technology in the medical areas of larger joints. The US firm is expected to add $85m to annual trading profit in the third full year as it allows cross selling in established markets and expansion into new and emerging markets. It is tipped to be earnings enhancing from the first full year.One-off transaction expenses and integration costs are estimated at around $100m over a three-year period. The purchase price represents a 20% premium over a 90-day volume weighted average price of ArthroCare's shares prior to Monday's announcement. It represents a multiple of 15.7 times enterprise value/adjusted 2012 earnings before interest, tax, depreciation and amortisation (EBITDA).The acquisition will be subject to regulatory and shareholder approval. The transaction is anticipated to be complete in mid-2014. RD