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Smith & Nephew to take over stem cell company Osiris Therapeutics for $660.5M

Smith & Nephew PLC agreed to acquire Osiris Therapeutics Inc., a stem cell research company, for $19 per share in cash, or about $660.5 million.

Columbia, Md.-based Osiris offers regenerative medicine products, including skin, bone graft and articular cartilage substitutes. The company's main products, Grafix and Stravix — human placental tissue used for surgery and for treating wounds, respectively — are expected to continue to deliver strong double-digit growth into the medium term.

Under the deal's terms, Smith & Nephew, through its newly formed unit Papyrus Acquisition Corp., will launch a two-step tender offer no later than April 2 to purchase all of the outstanding common shares of Osiris for $19 apiece in cash, representing a 37% premium over the 90-day volume weighted average price of Osiris' shares before March 12.

Peter Friedli, chairman and co-founder of Osiris, will commit to tender about 30% of the company's outstanding shares in favor of the transaction.

Smith & Nephew, a U.K.-based medical technology company, will finance the transaction through existing cash and debt facilities. The deal is expected to be accretive to the company's adjusted EPS from 2020 and to generate a return on invested capital that exceeds the company's cost of capital in the third year after closing.

The companies anticipate closing the acquisition in the second quarter, subject to closing conditions, including antitrust clearances and the tender of a majority of Osiris' common stock. The deal has received board approvals from both companies.

Either company could terminate the deal if it has not been completed by Dec. 12, upon which Osiris will be required to pay to Smith & Nephew a fee of about $18.7 million.

Cantor Fitzgerald & Co. rendered a fairness opinion to Osiris' board in connection with the transaction. Hogan Lovells US LLP serves as legal counsel for Osiris.