Smith & Nephew To Acquire ArthroCare For $1.7 Bln - Quick Facts

(RTTNews) - Medical devices maker Smith & Nephew Plc (SN.L, SNN) announced Monday that it agreed to acquire medical device company ArthroCare Corp. (ARTC) for $48.25 per ArthroCare share in cash, a total consideration of about $1.7 billion and an enterprise value of $1.5 billion.

The purchase price represents a 20% premium over the 90-day volume weighted average price of ArthroCare's shares prior to this announcement.

The Board of ArthroCare has recommended the transaction.

Smith & Nephew expects that substantial cost and revenue synergies will add about $85 million to annual trading profit in the third full year.

Smith & Nephew expects that acquisition will generate a return on capital employed exceeding its cost of capital in third full year. The company said the acquisition will be accretive to adjusted earnings per share from first full year.

The acquisition will be subject to customary conditions, including a vote of ArthroCare's shareholders and governmental clearances.

Pending the satisfaction of such customary conditions, Smith & Nephew anticipates closing the transaction in mid-2014. ArthroCare will be integrated swiftly to minimise disruption to customers.

One Equity Partners, the largest shareholder with convertible preferred shares equivalent to 17% of the equity, has committed to vote its shares in support of the transaction, subject to customary conditions.

Smith & Nephew stated that the purchase price of $48.25 per ArthroCare share, or total consideration of $1.7 billion or enterprise value of $1.5 billion net of cash in ArthroCare will be financed from Smith & Nephew's debt facilities and cash balances, including the existing $1 billion revolving credit facility and a new two-year $1.4 billion term loan facility.

Smith & Nephew noted that it has completed $226 million of its $300 million share buy-back programme. In light of this acquisition Smith & Nephew has suspended this programme.

At the end of 2014 we expect Smith & Nephew's net debt to EBITDA to be below 1.5 times.

In the year ended 31 December 2012, ArthroCare had net sales of $368 million, net income before taxes of $64m, total assets of $520 million and net assets of $445 million. Total revenue for the first three quarters of 2013 was $276 million, an increase of 2% over the first three quarters of 2012.