Johnson & Johnson and Smith & Nephew abandoned advanced talks to combine J&J's orthopaedics business with the UK medical technology company through a reverse merger. The proposed combination would have created a company worth $34 billion. The companies had agreed on the principal financial terms and transaction structure. The companies were considering an announcement in mid-October, but the negotiations failed at the last moment over the choice of chief executive.
J&J wanted Namal Nawana, the head of J&J's orthopaedics division, to lead the combined business. Smith & Nephew wanted chief executive Deepak Nath to take that role. Smith & Nephew chair Rupert Soames, who would have remained board chair, made Nath's appointment a non-negotiable condition. Soames's position reduced J&J's interest in the transaction.
Smith & Nephew may also have specifically opposed appointing Nawana. Nawana previously spent 18 months as Smith & Nephew's chief executive before leaving in 2019 because the company would not meet Nawana's compensation demands. Smith & Nephew has partly attributed frequent chief executive changes to differences between UK and US pay. Smith & Nephew raised Nath's maximum compensation package this year to $15.3 million from 2027, compared with $7.2 million last year.
J&J's finance chief said last week that J&J is leaning toward spinning off the orthopaedics division into a separately listed company. The finance chief credited Nawana with improving the division's recent performance. The proposed merger could have helped Smith & Nephew escape several years of weak growth. Smith & Nephew shares have fallen 21% over the past 12 months. However, the FTSE 100 index has gained 13% over the same period.
Due Diligence co-creator James Fontanella-Khan is leaving the newsletter to become AC Milan's chief corporate affairs officer on Monday. Fontanella-Khan writes that a potential professional football career in Italy preceded a move into journalism 25 years ago. Fontanella-Khan joined the Financial Times at 22 and reported across Africa, Asia and Europe before moving to New York. Fontanella-Khan argues that reporting on deals revealed more about powerful people's personalities and vulnerabilities than about financial calculations. Fontanella-Khan credits collaboration across the Financial Times with helping Due Diligence compete against larger rival newsrooms.
Johnson & Johnson and Smith & Nephew Call Off $34B Merger Over Leadership Dispute
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Summary
Johnson & Nephew and Johnson & Johnson have ended talks to merge J&J’s orthopaedics unit via reverse merger. The $34 billion deal collapsed due to leadership disagreements. J&J favored Namal Nawana, but Smith & Nephew demanded Deepak Nath. Smith & Nephew’s chair Rupert Soames refused to budge, hurting J&J’s interest. J&J may now spin off the orthopaedics division. On-chain news shows growing interest in AI + crypto news as major deals face new hurdles.
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