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Centerpulse considers US counter-offer

Centerpulse is Europe's biggest orthopaedics firm Keystone Archive

The Swiss orthopaedics firm, Centerpulse, is at the centre of a multibillion franc takeover battle between Britain's Smith & Nephew and Zimmer of the United States.

This content was published on May 21, 2003 - 11:45

On Wednesday the Zurich-based company confirmed it was considering an offer from Zimmer worth around SFr4.26 billion ($3.3 billion).

Zimmer's bid includes a cash offer of SFr120 per Centerpulse share, plus 3.68 Zimmer shares for every Centerpulse share.

The deal values Centerpulse at around SFr350 per share.

Zimmer's bid has outstripped an offer made in March by rival Smith & Nephew, worth SFr282 per share.

Analysts said at the time that the Smith & Nephew offer was too low.

"Serious" offer

Ray Elliott, the chairman and chief executive officer of Zimmer Holdings, told swissinfo that his offer for Centerpulse was "friendly" and "competitive".

Elliott confirmed that Zimmer had held an initial meeting with Centerpulse, adding that he hoped to conduct the take-over in a positive manner.

"We're committed to making this acquisition, and if we have to fight for it we will, but it's not the ideal way to do a deal," Elliot said.

"You always want to fight for what you believe in, but the best deals are those done in a friendly way, with less damage to everyone."

However, he added that Zimmer's offer has its limits.

"I would never buy into anything at any price. We have disciplined rules...[and] I wouldn't pay just anything for Centerpulse."

Elliott also moved to water-down speculation that a successful takeover would result in job losses at Centerpulse's Winterthur plant.

"We have publicly written a letter to the employees in Winterthur, committing [ourselves] to a long term commitment to that operation."

Bidding war

Formerly known as Sulzer Medica, Centerpulse has been busy re-inventing itself in recent years after being hit by an expensive scandal involving faulty hip and knee implants.

In a clear sign that it has managed a turnaround, the company announced a profit last year of SFr337 million. During the past 12 months it has seen its share price more than double.

Centerpulse, which is Europe's largest orthopaedic devices manufacturer, has made no secret of its desire to join forces with a second firm.

It hopes to gain a larger share of the global orthopaedics industry, which is worth an estimated $14 billion a year and is growing at up to 14 per cent annually.

Fair price

Michel Auch, an analyst at Geneva-based private bank Ferrier Lullin, told swissinfo that Zimmer's offer was not excessive.

"The price that Smith & Nephew offered was in the low range," he said.

Auch added that growth prospects in the orthopaedics sector remained high.

"The industry focuses on medical technology to help cure severe illnesses that effect a growing part of the population," said Auch.

"That's why it's stayed so dynamic in recent years, as opposed to the downturn that has effected the economy as a whole."

News of the rival bid saw Centerpulse shares surge to SFr322 - up 16 per cent on the start of the week.

The bid also saw Zimmer shares shed eight per cent on the New York Stock Exchange amid fears that it may have to pay a premium to outbid Smith & Nephew.

Decision in weeks

In March, Smith & Nephew offered to buy Centerpulse for £1.5 billion (SFr3.72 billion), in a deal that would have created the world's third-largest orthopaedics firm.

Centerpulse said in a statement on Thursday that it was evaluating Zimmer's offer.

A company spokeswoman told swissinfo that a decision would be made within weeks.

swissinfo, Jacob Greber in Zurich

Centerpulse

Smith & Nephew tabled a SFr3.72 billion bid for Centerpulse in March.
This has now been topped by Zimmer's SFr4.26 billion offer.
Centerpulse said it would make a decision "within weeks".

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