Plans to merge Johnson & Johnson’s orthopaedics division with Smith & Nephew collapsed recently after disagreements over leadership prevented the deal from moving forward. The proposed transaction sought to create a transatlantic medical technology firm valued at approximately $34 billion by combining J&J’s DePuy Synthes unit with London-listed Smith & Nephew.
Negotiations had progressed to an advanced stage, with both companies reportedly aligned on financial terms and deal structure. However, the talks fell apart due to a dispute over who would lead the combined business. Johnson & Johnson aimed to appoint Namal Nawana, the head of its orthopaedics division and former Smith & Nephew chief executive, as the CEO of the merged entity. Nawana resigned from Smith & Nephew in 2019 after just 18 months amid disagreements over compensation demands.
Smith & Nephew refused to accept Nawana in the leadership role and insisted that its current CEO, Deepak Nath, remain at the helm. Rupert Soames, Smith & Nephew’s chair, reportedly made this a non-negotiable condition. This stance cooled Johnson & Johnson’s interest and ultimately led to the collapse of the deal.
Smith & Nephew first proposed the combination earlier this year. The offer valued Johnson & Johnson’s orthopaedics unit at up to $22 billion—nearly double Smith & Nephew’s market capitalization of around £9.4 billion ($12.6 billion). The deal structure included J&J shareholders owning a 50.1% stake in the combined group, with Smith & Nephew shareholders holding the remainder. As part of the terms, Smith & Nephew would have paid J&J a dividend of about $10 billion, financing the payment through debt issuance.
Johnson & Johnson announced in 2025 its intention to spin off or sell DePuy Synthes to concentrate on faster-growing business segments. In its recent third-quarter earnings report, J&J’s chief financial officer, Joe Wolk, indicated the company was leaning toward spinning off the unit as an independent public company, citing improved performance under Nawana’s leadership. Sales of the orthopaedics division increased by 3.2% in the quarter.
The proposed merger would have allowed Smith & Nephew to address years of sluggish growth, amidst pressure from activist investors including Cevian, who have called for a breakup or spin-off of its orthopaedics division. Nath has rejected these calls, asserting this year that the division is now better managed. Over the past year, Smith & Nephew’s shares have declined by 21%, underperforming the FTSE 100, which rose by 13%.
Executive compensation issues have complicated relations between the two companies. Nawana’s departure in 2019 followed Smith & Nephew’s acknowledgment of an inability to meet his pay expectations compared with US device companies. Similarly, Smith & Nephew raised Nath’s maximum remuneration target from $7.2 million in 2023 to $15.3 million beginning in 2027, amid concerns about executive retention and shareholder pushback.
Smith & Nephew shares closed 1.7% higher following news of the deal’s collapse. Both Johnson & Johnson and Smith & Nephew declined to comment on the negotiations.