Smith+Nephew and Johnson & Johnson had agreed on price and structure for a deal that would have reshaped the hip and knee market. What they could not agree on was who would run it.
Smith+Nephew spent months negotiating a combination with J&J’s orthopaedics business, the Financial Times reported on Friday, citing people familiar with the talks. The main financial terms and the structure were settled, and the two sides had discussed announcing it in mid-October.
The deal was set up as a reverse merger. Smith+Nephew valued J&J’s hip and knee business at up to $22 billion, close to double its own market capitalisation of about £9.4 billion. J&J shareholders would have owned 50.1% of the combined group, and Smith+Nephew would have paid J&J a debt-funded dividend of around $10 billion to bridge the gap in valuations.
Leadership is where it fell apart. J&J wanted Namal Nawana, who runs its orthopaedics division and happens to be a former Smith+Nephew chief executive. He left the British company in 2019, after 18 months in the job, following a dispute over pay. Chairman Rupert Soames would only go ahead with the current CEO, Deepak Nath, in charge. J&J’s interest cooled after that.
On paper the fit was strong. J&J said in October 2025 that it would spin off orthopaedics as a standalone DePuy Synthes, and Smith+Nephew would have given the new company instant scale against Stryker and Zimmer Biomet. DePuy brings volume in joint reconstruction, trauma, spine and sports medicine. Smith+Nephew would have added depth in shoulder repair, the CORI robotic platform and the world’s second-largest advanced wound care business by revenue.
Regulators would have had plenty to say. The overlap in knees and hips is direct, and authorities in Brussels, London and Washington would very likely have asked for divestments. In 2011 Smith+Nephew turned down a J&J approach at 750p a share, and analysts were already flagging competition concerns back then.
Probably Smith+Nephew. After three years of cost cuts and sales initiatives, growth is still modest, and the company is counting on newer products such as Tendon Seam, the rotator cuff system it picked up in January with Integrity Orthopaedics for up to $450 million. Its shares are down 21% over the past year, while the FTSE 100 is up 13%, the FT noted. Investors will want to know why the board walked away from agreed terms over a personnel question. The FT also points out that the board this year raised Nath’s maximum pay to $15.3 million from 2027, which won’t make that conversation any easier.
For J&J the cost is mostly one of timing. DePuy Synthes is still due to separate by mid-2027, and finance chief Joe Wolk said last week the group was leaning towards a spin-off.
In medtech, integration is where a merger earns its premium, and whoever runs the company runs the integration. When a transaction this size breaks down over the CEO role, it suggests neither side trusted the other to deliver the synergies. Consolidation in orthopaedics is unfinished business. Fifteen years on, Smith+Nephew is still the company everyone is watching.
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Source: Based on reporting by the Financial Times, as carried by Reuters.
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