S&N, J&J ortho merger talks collapse

Advanced merger talks between Smith & Nephew and Johnson & Johnson’s orthopaedics division have collapsed after the two sides failed to agree on who would lead the combined business. Discussions to combine the London‑listed medical devices maker with J&J’s orthopaedics unit had reached an advanced stage, with alignment on the main financial terms and structure of a potential transaction, before breaking down at the last minute.

The proposed deal would have valued J&J’s hip and knee replacement unit at up to $22 billion, nearly double Smith & Nephew’s market capitalisation of about £9.4 billion (equivalent to $12.58 billion).

The key stumbling block was who would serve as chief executive of the enlarged company. J&J sought to install Smith & Nephew’s former CEO, Namal Nawana, as head of the merged entity. Smith & Nephew rejected this approach and stated it would only agree to a transaction if its current boss, Deepak Nath, remained CEO.

Namal Nawana had previously served as Smith & Nephew’s chief executive for about 18 months before leaving the role in 2019. He departed after the UK medical devices group was unable to meet his pay demands. The renewed proposal for him to return, this time to lead a much larger combined orthopaedics business, became the focal point of disagreement in the latest talks.

Beyond the leadership dispute, the companies had reached broad agreement on the main financial aspects of a potential merger. The contemplated valuation of up to $22 billion for J&J’s hip and knee replacement division underscored the relative scale of the U.S. unit compared with Smith & Nephew’s market value of £9.4 billion.

The orthopaedics division at J&J, focused on hip and knee prostheses, has been positioned as a sizeable standalone business in its own right. The illustrative valuation attached to the unit in these talks highlighted investor interest in specialised medical device assets, as well as the potential for large strategic combinations in the sector.

Smith & Nephew ultimately refused to proceed on the leadership terms proposed, leading to the collapse of the merger discussions. A spokesperson for Smith & Nephew declined to comment on the details of the talks.

J&J’s hip and knee replacement division has attracted interest from private equity funds, in addition to the now‑ended talks with Smith & Nephew. Discussions with investment funds have taken place, but no agreement has yet been reached.