Smith & Nephew expands in wound care with U.S. buy
LONDON (Reuters) - Healthcare firm Smith & Nephew (SN.L) said it would acquire privately-held U.S. firm Healthpoint for $782 million in cash, as part of its strategy to expand in the fast-growing area of bioactive wound care.
Healthpoint makes Santyl, an ointment that removes dead tissue in wounds, and is in phase III trials for a treatment for leg ulcers.
"We want to be in a growing business, to rebalance the company as much as we can in a better growth area, and this is definitely one of them," Chief Executive Olivier Bohuon said on a call with reporters on Wednesday.
FTSE 100-listed S&N is best known for making artificial hips and knees, a sector that has been impacted by the tough economic climate.
Bohuon is keen to expand further into areas such as advanced wound therapy, which have been performing strongly. The sector currently makes up about 25 percent of S&N.
However, S&N shares fell as much as 2 percent at the open, with analysts welcoming the strategic rationale but some questioning whether S&N had overpaid for Healthpoint.
"Although this deal seems to be strategically important, the market will look at the valuation, which at 4.1 times revenues and 71 times EBIT will be seen as rich," said Panmure Gordon in a note.
Bohuon defended the price paid, saying the multiple was within the range of other acquisitions in the sector.
"We believe it's a fair price, it's a good price for acquiring such a growing business and such a future. It's really normal for deals done in this kind of field," said Bohuon.
Bioactives offer novel techniques to aid skin regeneration and the treatment of hard-to-heal wounds such as diabetic ulcers, and the deal highlights the growing importance of the field.
"In Healthpoint, we have found the ideal entry into this attractive segment," said S&N.
"It is complementary on many levels, including product range, U.S. scale and strong commercial capabilities."
Fort Worth, Texas-based Healthpoint is expected to record $190 million revenues in 2012 and S&N expects the deal to boost earnings from 2013, it said.
The business will integrate into S&N's advanced wound management division, doubling that division's U.S. sales, S&N said.
All Healthpoint sales are currently in the U.S., though Bohuon said the company may look to expand into other countries in the future.
Deutsche Bank advised S&N on the transaction, and BofA Merrill Lynch and JP Morgan advised Healthpoint.
(Reporting by Rosalba O'Brien; editing by Kate Holton and Keiron Henderson)
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