Smith & Nephew CEO Has $1.5 Billion for Acquisitions

Smith & Nephew Plc, the U.K.’s biggest medical-device maker, has $1.5 billion to spend on acquisitions and is scouting wound-care companies in the U.S. as well as potential deals in trauma and sports medicine.

Smith & Nephew also is looking to buy distributors and manufacturers in emerging markets to support a new focus on more affordable products for countries such as India, China, Brazil and Russia, Chief Executive Officer Olivier Bohuon said in an interview yesterday. The company plans to introduce its first so-called mid-tier wound products this year, he said.

The dealmaking is part of Bohuon’s strategy to reduce the company’s reliance on orthopedics as people put off getting hip and knee implants because of the sluggish economy. While there is still a market for premium-priced products, the company sees much potential in the mid-tier segment, Bohuon said in an interview today.

“We need to bring them products which are appropriate, which means low cost and a different business model,” said Bohuon, 54, who joined Smith & Nephew in April 2011 after serving as CEO of French drugmaker Pierre Fabre SA.

Smith & Nephew second-quarter sales rose 4.4 percent to $1.07 billion, the company said yesterday, as growth in wound care and emerging markets offset declines in orthopedics, which accounts for 35 percent of the company’s revenue. The business is expected to be “flat at best” and will become a smaller portion of revenue as other areas grow, he said.

Hips, Knees

Smith & Nephew gained 0.4 percent to close at 787.50 pence yesterday in London, giving the company a market value of 7.1 billion pounds ($10.8 billion). The stock has returned 18 percent this year including reinvested dividends.

The orthopedics unit produces artificial hips and knees. The trauma business makes plates and screws that hold fractured bones in place, while sports medicine covers minimally-invasive surgery on joints, particularly the knee, shoulder and hip. Its wound-care products include antimicrobial dressings.

India’s Adler Mediequip Private Ltd. will be Smith & Nephew’s hub for developing mid-tier trauma products for the emerging markets if the purchase of the company is approved by authorities this year, said Bohuon. Smith & Nephew announced the acquisition of Adler, as well as the brands and assets of Sushrut Surgicals Private Ltd., in May.

Smith & Nephew produces wound products for emerging markets in Suzhou, China, and has based its mid-tier orthopedics hub in Beijing.

Bohuon has announced eight deals since joining Smith & Nephew, according to data compiled by Bloomberg. The largest was the $782 million purchase last year of Healthpoint Biotherapeutics, a Fort Worth, Texas-based company that makes treatments for wounds that are difficult to heal.

Speculation arises periodically that Smith & Nephew will attract a takeover bid. Bohuon said the company wants to be the acquirer and not the acquired.

“We want to stay independent,” he said. “Everything we do is to stay independent. The board is very clear on that and I am their steward.”

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