Smith & Nephew In Early Merger Talks with Biomet

Orthopedic manufacturer Smith & Nephew has held “very preliminary talks” over a possible tie-up with fellow orthopedic manufacturer Biomet, it said on Thursday as it met forecasts with higher third-quarter underlying earnings, according to Reuters News Service.

Combining London, UK-based Smith & Nephew and Warsaw, IN-based Biomet would help the two firms close the gap on the market leaders for joint implants, Stryker of Kalamazoo, MI, New Brunswick, NJ-based Johnson & Johnson and Warsaw, IN-based Zimmer Holdings Inc.

Analysts said a tie-up would most likely take the form of an offer by Smith & Nephew for Biomet pitched at $10.5 billion to $11 billion.

Smith & Nephew reported a 6% rise in earnings per share before goodwill to 10.3 cents in the three months to September 30 on a 10% rise in revenues to $679 million, and kept its forecast for full-year earnings growth of 3-to-5%.

Third-quarter earnings estimates ranged from 10.0 cents to 10.9 cents and revenue forecasts from $664 million to $677 million, according to a Reuters poll of six analysts.

Smith & Nephew has long been tipped as a potential bidder for Biomet, which hired investment bank Morgan Stanley in April to consider its strategic options.

A source close to the matter told Reuters previously that the two firms held talks this summer but no offer was made.