Smith & Nephew and J&J Orthopaedics Merger Talks Collapsed Over Who Would Be CEO, FT Reports

Since J&J CEO Joaquin Duato said on Oct. 13 that the company was leaning toward spinning off its orthopaedics unit, DePuy Synthes, with separation targeted for mid-2027, a second track has come to light. According to the Financial Times, J&J and Smith & Nephew spent months negotiating a combination of the two businesses before the talks died.

The FT reported Friday, Oct. 23, citing people familiar with the matter, that discussions reached an advanced stage. Both sides were aligned on the main financial terms and structure. The two companies had been eyeing a mid-October announcement, the FT said, before talks ended several weeks ago.

Both companies declined to comment on the report.

The CEO fight

The FT says the deal fell apart at the last minute over leadership. J&J wanted Namal Nawana, president of DePuy Synthes, to run the combined company. Smith & Nephew refused and insisted that its current CEO, Deepak Nath, keep the job. The FT also says Smith & Nephew chairman Rupert Soames was the one who held that line.

Nawana knows the other side well. He was Smith & Nephew's CEO for about 18 months before leaving in 2019. The FT says he left because the company could not meet his compensation expectations. J&J publicly named him as the expected head of DePuy Synthes when it announced the separation plan in October 2025.

A separate person familiar with the matter told Reuters that J&J was never prepared to pursue a deal with Nath as CEO of the combined group. According to that person, Smith & Nephew knew J&J's position. The talks collapsed anyway after Smith & Nephew sought to have Nath lead the merged company.

Neither account has been confirmed by either company on the record.

The numbers

The FT reports that Smith & Nephew approached J&J earlier this year with an offer valuing the hip and knee unit at as much as $22 billion. That is nearly double Smith & Nephew's own market value of £9.4 billion ($12.58 billion). The unit was reportedly seeking about $20 billion and has drawn private equity interest, but no sale has materialised.

J&J shareholders would have owned 50.1% of the combined company, the FT said. The FT also reported that the structure would have involved about $10 billion in debt financing at Smith & Nephew to fund a payment to J&J.

That is a heavy load against Smith & Nephew's own figures. The company reported net debt of $3.02 billion as of June 27, 2026, a net-debt-to-adjusted-EBITDA ratio of 1.8 times, and first-half free cash flow of $231 million, down from $244 million a year earlier. In August it held its full-year free cash flow forecast at about $800 million but cut expected underlying revenue growth to around 4% from around 6%. Ten billion dollars is 12.5 times that forecast.

DePuy Synthes brought in $9.3 billion in sales in 2025, according to J&J's results.

Smith & Nephew's side

Smith & Nephew has not explained its position publicly. The FT account, though, frames the refusal as a board protecting its own management. The case for that is plain enough. The company has been working through three years of cost cuts and sales initiatives and is leaning on newer products to restore growth. A management team that has laid out a plan targeting more than $1 billion in free cash flow by 2028 has an obvious reason to want to finish it.

The cost of the refusal is also visible. Smith & Nephew's shares fell 6.6% to 1,118 pence in August after it cut its growth forecast, the worst performer in the FTSE 100 that day, according to Morningstar. They slipped again about two weeks later when news broke that the finance chief was leaving. Walking away from a deal of this size while the operating story is still being repaired is a choice shareholders will judge.

One caution on the numbers. One outlet's headline cites a $34 billion deal value. That figure does not appear in the Reuters or FT-based accounts, and it is not used here.

What happens next

J&J's stated path is the spinoff, with separation targeted for mid-2027. The talks with Smith & Nephew ended weeks before Duato's Oct. 13 comments, so the spinoff lean came after the merger track had already stalled.

The door may not be shut. John West, global head of analysis at Mergermarket, said the combination would have created a rich portfolio across knee and hip implants, filling musculoskeletal gaps for both companies. He said it would not be surprising if the two returned to the table.

That depends on a question neither company has answered: whether Nawana, Nath or a third candidate could ever run a combined business that both boards accept.