Smith & Nephew-J&J Orthopaedics Merger Collapses Over CEO Dispute

Smith & Nephew-J&J Orthopaedics Merger Collapses Over CEO Dispute

FT: Smith & Nephew and J&J orthopaedics talks fall apart

Smith & Nephew PLC came close to combining with Johnson & Johnson's DePuy Synthes orthopaedics unit, but discussions collapsed over a leadership disagreement, the Financial Times reported on Friday. Smith & Nephew had approached the New Jersey-based healthcare company earlier in 2026 with a combination proposal, seeking to use a large merger to address years of weak growth in orthopaedics. Talks ultimately broke down because the two sides could not agree on who would run the merged business.

Deal size: a $22 billion valuation and 50.1% ownership

The proposed transaction would have valued J&J's hip and knee replacement unit at as much as $22 billion, nearly double Smith & Nephew's market value of about £9.4 billion, or roughly $12.6 billion. J&J shareholders would have owned 50.1% of the combined company. The companies had been eyeing a mid-October announcement before talks collapsed several weeks ago.

The CEO clash: Nawana versus Nath

J&J wanted Namal Nawana, head of its orthopaedics division and a former Smith & Nephew chief executive, to lead the merged group. Nawana ran Smith & Nephew for 18 months before stepping down as CEO in 2019, reportedly because the company could not meet his pay demands. Smith & Nephew refused, insisting that its current chief executive Deepak Nath remain in charge, with chair Rupert Soames making that condition a red line in negotiations. The leadership dispute caused J&J's interest to cool.

J&J's fallback: spinning off DePuy Synthes

J&J announced plans in October 2025 to separate its orthopaedics business into a standalone company named DePuy Synthes. The unit, reportedly seeking a price tag of around $20 billion, has since drawn private equity interest, but no deal has materialised. Chief Financial Officer Joseph Wolk said alongside last week's third-quarter results that J&J now favours a spin-off, targeted for mid-2027. The orthopaedics business generated about $9.2 billion in sales in 2024.

Market reaction: Smith & Nephew shares edge up

On Friday in London, Smith & Nephew shares were 1.4% higher at 1,150.00 pence, giving a market capitalisation of £9.61 billion. Johnson & Johnson shares were down 0.6% at $265.90 in New York pre-market trading. Smith & Nephew shares are down 21% over the past 12 months, compared with a 13% rise in the FTSE 100 index. Activist investor Cevian and other shareholders have called for a separation of Smith & Nephew's own orthopaedics arm because of underperformance, but Nath rejected break-up calls earlier this year, saying the division is operating better.

What comes next for both companies

For J&J, the path now points to completing the DePuy Synthes spin-off by mid-2027 while keeping the door open to private equity interest. For Smith & Nephew, the collapse leaves it to tackle orthopaedic growth pressures and shareholder demands alone. Neither company has commented publicly on the reported talks.