Smith & Nephew PLC (LON:SN.) is paying around US$660mln in cash to acquire Osiris Therapeutics, Inc. (NASDAQ:OSIR), a fast-growing US company delivering regenerative medicine products, including skin, bone graft and articular cartilage substitutes.
The FTSE 100-listed firm said it is paying US$19.00 per share for the Nasdaq-listed firm, shares in which were trading at US$19.35 each in pre-market New York trading, up 2.5% on Monday’s close.
READ: Smith & Nephew shares weak on reports of talks over possible $3bn US orthopaedics acquisition
The group said the purchase price represents a 37% premium over the 90-day volume weighted average price of Osiris shares prior to the announcement.
In early afternoon trading in London, Smith & Nephew shares were 1.3% higher at 1,480.50p.
Namal Nawana, Smith & Nephew’s chief executive officer, commented: "Greater presence in the fast-growing regenerative medicine market enhances our portfolio and will help immediately accelerate our wound management business as well as provide longer-term innovations in additional channels and indications.
“We sought out a fast growing portfolio with strong clinical evidence addressing critical needs in the marketplace."
The companies expect to close the transaction in the second quarter of 2019, subject to customary closing conditions, with the acquisition to be financed from Smith & Nephew's existing cash and debt facilities.
Expected to be earnings accretive
The UK firm said the transaction is expected to be accretive to its adjusted earnings per share from 2020 and is expected to generate a return on invested capital that exceeds Smith & Nephew's cost of capital in the third year after closing.
For the nine months ended 30 September 2018, Osiris reported an 18.7% year-on-year increase in revenue, with third-quarter revenue of $36.5mln, a 22.4% increase year-on-year.
Osiris' principal products, skin substitutes Grafix and Stravix, accounted for more than 70% of revenue in the first nine months of 2018 and drove the majority of growth.
Smith & Nephew said they expect these two products to continue to deliver strong double-digit growth into the medium term.
Simon Fraser, President, Advanced Wound Management at Smith & Nephew, said: "Grafix offers a compelling new option for managing hard to heal wounds and Stravix expands our tissue repair portfolio. We will drive synergies across products from common call points and increased access to our wider customer base."
Osiris also offers BIO4 bone matrix for bone repair and Cartiform, an allograft for articular cartilage repair, products currently exclusively distributed by third parties.