Feds and ArthroCare Shareholders OK Purchase by Smith & Nephew

The Federal Trade Commission (FTC) granted ArthroCare Corp. early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with the company’s proposed merger with Smith & Nephew plc.

The FTC’s notice was filed on March 13, according to a filing with the U.S. Securities and Exchange Commission. The termination paves the way for Austin, Texas-based ArthroCare to complete the $1.7 billion deal ($48.25 per share) that was announced on Feb. 3.

On May 8, ArthroCare’s shareholders also put their stamp of approval on the $1.7 billion deal.
The vote at the special meeting of shareholders means the sale to Smith & Nephew will move forward, with the transaction expected to close by the end of May or early June. Shareholders representing 84 percent of the company’s shares of stock took part in the vote, with 98 percent approving the offer that will pay them $48.25 per share.

The deal got off to a rocky start after an ArthroCare investor filed a lawsuit to block the Smith & Nephew purchase, accusing the company’s leadership of agreeing to a purchase price that was too low.

ArthroCare reported $377.9 million in revenue for 2013. It reported a $4.8 million increase in fourth-quarter revenue—$101.7 million compared to $96.9 million a year earlier. The company’s quarterly earnings grew by $1.7 million, to $16.8 million from $15.1 million a year earlier.

The deal gives Smith & Nephew products for minimally invasive surgery used in sports medicine, which is a sector that’s growing faster (and with less price pressure) than traditional knee and hip replacement.

ArthroCare makes products used in arthroscopic surgery on shoulders and knees. Sports medicine typically involves minimally invasive soft-tissue surgery from sports or work-related injuries. The company specializes in soft-tissue surgery. It makes devices, instruments and implants that improve surgical procedures, including a radio-frequency technology that, according to the company, dissolves soft tissue with less damage than traditional heat-driven processes.

ArthroCare reported revenues of $96.1 million for the first quarter of fiscal year 2014, which ended March 31. The same quarter last year yielded $92.3 million, for an increase of 4 percent. Reported net earnings plummeted 64.7 percent to $3.6 million from $10.3 million in the first quarter of 2013. On a per-share basis, earnings declined 66.7 percent to 10 cents from 30 cents a year ago.