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Orthopedic and Dental Industry News Complete Archive »

Smith & Nephew Signs Agreement to Acquire ArthroCare BY ANDREW VAHRADIAN, FEBRUARY 4, 2014

Smith & Nephew (SNN) entered into a definitive agreement to acquire ArthroCare Corp. for $48.25 per share (20% premium) in cash, equating to a total consideration of approximately $1.7 billion and an enterprise value of $1.5 billion, or approximately 4.0x LTM revenues and 15.7x adjusted 2012 EBITDA.

The transaction will help SNN build a comprehensive resection and repair product portfolio, further strengthen its sports medicine business and accelerate the company's strategy for greater growth overall. In resection, ArthroCare’s radio frequency (RF) technology will allow customers a greater range of choices when combined with SNN’s mechanical blade portfolio, while ArthroCare’s shoulder anchor systems complement SNN's knee repair lines, creating a more integrated joint repair product portfolio.

Furthermore, the deal presents SNN with additional revenue opportunities by means of a larger combined global footprint and channel presence, and by providing SNN with a way into the Ear, Nose & Throat (ENT) marketplace.

ArthroCare only just entered into a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice (DOJ) to resolve its ongoing investigation by the DOJ regarding allegations of securities and related fraud committed under a previous management team. The investigation was first announced in December 2008.

SNN anticipates cost and revenue synergies to add roughly $85 million to the company's annual trading profit by the third full year. Given these announced plans, the deal would be expected to close mid-2014.

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