Smith & Nephew Plc’s M&A bid for ArthroCare, at the lowest premium for a medical-instruments company since the 1990s, is giving Stryker or Johnson & Johnson a shot at a rival offer.
ArthroCare, which makes products used in sports medicine for minimally invasive surgery, closed yesterday 99 cents above the $48.25-a-share bid from Smith & Nephew as some investors bet on higher proposals. Stryker, which acquired technology for robot-assisted surgery last year, and J&J, the world’s biggest maker of health-care products, are the most likely candidates to counter the $1.7 billion offer, said William Blair & Co.
The deal came together after an agreement with the U.S. Department of Justice last month boosted the stock and prompted takeover speculation. The gains mean that Smith & Nephew is offering only 5.6 percent more than ArthroCare’s average price in the prior 20 days, according to data compiled by Bloomberg. JMP Group Inc. estimated the company could get about $55 a share in a sale because of its high-margin assets in sports medicine and the chance to expandinternational sales.
“There are a lot of reasons why a bigger company would want this,” David Turkaly, a New York-based analyst at JMP, said in a phone interview. “Could somebody pay more than $1.7 billion for ArthroCare? I think the answer could be yes.”
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