Acquisition of ArthroCare Corporation by Smith & Nephew plc May Not Be in Shareholders’ Best Interests
Robbins LLP is investigating the acquisition of ArthroCare Corporation (NASDAQ: ARTC) by Smith and Nephew plc (NYSE: SNN). On February 3, 2014, the two companies announced the signing of a definitive merger pursuant to which Smith & Nephew will acquire ArthroCare in an all-cash offer which will pay ArthroCare shareholders $48.25 per share of common stock.
Is the Proposed Merger Best for ArthroCare and Its Shareholders?
Robbins LLP’s investigation focuses on whether the board of directors at ArthroCare is undertaking a fair process to obtain maximum value and adequately compensate ArthroCare shareholders in the merger.
As an initial matter, the $48.25 merger consideration is substantially below the three target prices including a price of $60.00 set by an analyst at Craig-Hallum Capital Group on January 8, 2014 and a price of $56.00 set by an analyst at Canaccord Genuity on January 7, 2014. In addition, the $48.25 merger consideration represents a premium to shareholders of 6% based on the company’s closing price on January 31, 2014. This one day premium is significantly below the average one day premium of over 35% for comparable transactions in the last three years. In addition, ArthroCare shares traded above the offer price as recently as January 27, 2014, and reached a high of $49.95 on January 8, 2014.
Further, on October 29, 2013, ArthroCare released its earnings for the fiscal quarter ended September 30, 2013, and reported increases in total revenue, product sales, and gross profit. Specifically, the company reported that total revenue increased to $91.9 million, or 5.7%, compared to the same quarter 2012. Product sales for the third quarter 2013 increased 5.4% compared to 2012, reaching $87.1 million. Further, the company’s gross profit for the third quarter increased to $63.0 million compared to $60.7 million in the third quarter of 2012.
Given these facts, Robbins LLP is examining the ArthroCare board of directors’ decision to sell the company to Smith & Nephew now rather than allow shareholders to continue to participate in the company’s continued success and future growth prospects.
ArthroCare shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
Arthrocare shareholders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.