Needham's Michael Matson said such a deal is "highly probable" and would boost Stryker's earnings 12 percent within a year even apart from tax inversion benefits. Matson upgraded Stryker from Hold to Buy, setting a $93 target in a note Tuesday.
Stryker Chief Executive Ken Lobos said in May that the company was considering a bid for Smith & Nephew, but then backed off and said no offer was coming.
British securities law bars Lobos from making an unsolicited offer for six months following the statement, unless a rival bidder materializes. Smith & Nephew's CEO Olivier Bohuon said he's not interested.
“A good deal must always have a strategy component. If it's just for money, I'm not sure this is great,” Bohuon told the U.K's Telegraph in June.
Any U.S. company that acquired U.K.-based Stryker would have the opportunity for a so-called tax inversion, avoiding relatively high U.S. corporate taxes by moving its headquarters offshore.
Acquiring Smith & Nephew would instantly make Stryker number two in reconstructive sales, number one in sports medicine, significantly boost its number two position in trauma, according to Matson, who figured Smith & Nephew holders would get a 20 percent premium.
Smith closed up 1.5 percent; Stryker closed up 0.05 percent.
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