NCR to Buy Retalix for $650 Million

Acquisition of Retalix will position NCR as the innovation leader delivering a world-class portfolio of hardware, software and services offerings for the retail industry

DULUTH, Ga.--(BUSINESS WIRE)--Nov. 28, 2012-- NCR Corporation (NYSE: NCR) announced a definitive agreement for NCR to acquire Retalix Ltd. (NASDAQ: RTLX), a leading global provider of innovative retail software and services, for a cash purchase price of $30.00 per Retalix share, implying a transaction value of approximately $650 million.

The addition of Retalix will strengthen NCR's global leadership position in the retail industry, and builds upon its successful integration of Radiant Systems into the NCR portfolio of solutions. This acquisition demonstrates NCR's commitment to its strategy and continued transformation to a hardware-enabled, software-driven business model, delivering solutions that materially improve business processes while enabling seamless consumer experiences across touch points, locations, and channels. The transaction is expected to accelerate NCR's corporate strategy by increasing the portfolio mix of higher-margin software and services, enabling increased value for our customers, and continued growth and improved margins for NCR shareholders.

“Retalix is a strong, strategic fit for NCR and the combination of our two companies will drive significant value for both our shareholders and customers,” said NCR Chairman and CEO, Bill Nuti. “Retalix's market-leading software and services capabilities will enhance NCR's retail solutions, creating a world-class portfolio of offerings. That innovation plus the addition of exceptional talent to our team positions NCR as the global leader in retail innovation.”

Retalix's software and services are deployed in over 70,000 retail locations with more than 400,000 customer touch points in over 50 countries that transact billions of dollars in annual sales across its platform. Retalix's strength with blue-chip retailers will be highly complementary to NCR and will enable additional sales opportunities across the combined installed base. The acquisition will provide Retalix's customers with backing of a $5.3 billion (FY '11) leader, and deep knowledge in retail and adjacent industries.

“I am very excited about today's announcement. Combining Retalix's impressive team and portfolio with NCR will create a powerful enterprise-class software platform capable of delivering a sustained competitive advantage in the retail industry,” said Shuky Sheffer, Chief Executive Officer of Retalix. “Together, we will create a talent pool and solutions portfolio that will be richer than anything available before, enabling our customers to deliver a superior omni-channel shopping experience. I am proud of our achievements and strongly believe that this is a great move that will benefit our customers, employees and shareholders.”

NCR also expects to use Retalix's software to accelerate the development of NCR's enterprise software platform, creating new software modules that can be used across the retail industry and leveraged across NCR's financial, travel and hospitality industries on a global scale.

Under the terms of the agreement, Retalix will merge with a subsidiary of NCR, and Retalix shareholders will receive $30.00 in cash per share of Retalix common stock. The transaction will be financed through a combination of cash and debt, and is expected to be accretive to NCR's Non-GAAP earnings for 20131.

The transaction, which is expected to be completed in the first quarter of 2013, is subject to, among other things, approval by Retalix Ltd. shareholders, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of other regulatory requirements and customary closing conditions. NCR has entered into voting agreements with Alpha Group and Ronex, the two largest Retalix Ltd. shareholders who hold approximately 38% of Retalix's outstanding shares.

J.P. Morgan acted as exclusive financial advisor and Morrison & Foerster LLP and Amit, Pollak, Matalon & Co. acted as legal counsel to NCR on the transaction. Jefferies & Co., Inc. acted as financial advisor and Meitar Liquornik Geva & Leshem Brandwein acted as legal counsel to Retalix Ltd. on the transaction.

Investor Conference Call

A conference call is scheduled today at 5:30 p.m. (EST) to discuss the acquisition of Retalix Ltd. Access to the conference call and a presentation describing the transaction, as well as a replay of the call, will be available on NCR's web site at http://investor.ncr.com/. Or you can access the call by dialing 888-324-0282 and entering the participant passcode, NCR. NCR's web site (www.ncr.com) contains a significant amount of information about NCR, including financial and other information for investors (http://investor.ncr.com.). NCR encourages investors to visit its web site from time to time, as information is updated and new information is posted.

1. The deal is expected to be accretive on a Non-GAAP basis; which includes adjustments for the amortization of acquired intangibles and other one-time items.

About NCR Corporation

NCR Corporation (NYSE: NCR) is a global technology company leading how the world connects, interacts and transacts with business. NCR's assisted- and self-service solutions and comprehensive support services address the needs of retail, financial, travel, hospitality, gaming, public sector, and telecom carrier and equipment organizations in more than 100 countries. NCR (www.ncr.com) is headquartered in Duluth, Georgia.

About Retalix

Retalix Ltd. is a leading global provider of innovative software and services to high volume, high complexity retailers, including supermarkets, convenience stores, fuel stations, drugstores and department stores. The company's products and services help its customers to manage and optimize their retail operations, differentiate their brand and build consumer loyalty, while providing retailers with the flexibility and scalability to support ongoing business transformation and growth. Retalix Ltd. offers solutions for point-of-sale (POS), sales channels and in-store management (including mobile and e-commerce), customer management and marketing, merchandising, and logistics. By leveraging a multitude of deployment options, including Software-As-A-Service (SaaS), Retalix Ltd. serves a large customer base of approximately 70,000 stores across more than 50 countries worldwide. The Company's headquarters are located in Ra'anana, Israel, and its North America headquarters are located in Plano, Texas. Retalix Ltd. stock trades on the NASDAQ and the Tel Aviv Stock Exchange.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as “seek,” "potential,” “expect,” “strive,” “continue,” “continuously,” “accelerate,” “anticipate”, “outlook”, “intend”, “plan”, “target” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could”. They include statements about NCR's plans for the business of Retalix Ltd.; anticipated financial and other results from the acquisition of Retalix Ltd. and its integration into NCR; expectations regarding revenue and cost synergies resulting from the acquisition; discussion of other strategic initiatives and related actions; and beliefs, expectations, intentions and strategies, among other things. Forward-looking statements are based on management's current beliefs, expectations and assumptions, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR's control.

Forward-looking statements are not guarantees of future performance, and there are a number of factors, risks and uncertainties that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements. In addition to the factors discussed in this release, these other factors, risks and uncertainties include those relating to: domestic and global economic and credit conditions, including the ongoing sovereign debt conditions in Europe, which could impact the ability of NCR's customers to make capital expenditures, purchase NCR's products and pay accounts receivable, drive further consolidation in the financial services sector and reduce NCR's customer base; other business and legal risks associated with multinational operations; the financial covenants in NCR's secured credit facility and their impact on NCR's financial and business operations; NCR's indebtedness and the impact that it may have on NCR's financial and operating activities and NCR's ability to incur additional debt; the adequacy of NCR's future cash flows to service NCR's indebtedness; the variable interest rates borne by NCR's indebtedness and the effects of changes in those rates; shifts in market demands, continued competitive factors and pricing pressures and their impact on NCR's ability to improve gross margins and profitability, especially in NCR's more mature offerings; manufacturing disruptions affecting product quality or delivery times; the effect of currency translation; NCR's ability to achieve targeted cost reductions; short product cycles, rapidly changing technologies and maintaining a competitive leadership position with respect to NCR's solution offerings; tax rates; ability to execute NCR's business and reengineering plans; turnover of workforce and the ability to attract and retain skilled employees, especially in light of continued cost-control measures being taken by NCR; availability and successful exploitation of new acquisition and alliance opportunities; NCR's ability to sell higher-margin software and services in addition to NCR's hardware; the timely development, production or acquisition and market acceptance of new and existing products and services (such as self-service technologies), including NCR's ability to accelerate market acceptance of new products and services; changes in Generally Accepted Accounting Principles (GAAP) and the resulting impact, if any, on NCR's accounting policies; continued efforts to establish and maintain best-in-class internal information technology and control systems; market volatility and the funded status of NCR's pension plans; the success of NCR's pension strategy; compliance with requirements relating to data privacy and protection; expected benefits related to acquisitions and alliances, including the acquisition of Retalix Ltd., not materializing as expected; the acquisition of Retalix Ltd. not being timely completed, if completed at all; uncertainties with regard to regulations, lawsuits, claims and other matters across various jurisdictions; and other factors detailed from time to time in NCR's and Retalix's respective U.S. Securities and Exchange Commission reports and NCR's annual reports to stockholders. NCR and Retalix Ltd. do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Source: NCR Corporation

NCR Media Relations
Mark Scott, 404-431-8733
mark.scott@ncr.com
or
NCR Investor Relations
Gavin Bell, 212-589-8468
gavin.bell@ncr.com
or
Retalix Ltd.
Sarit Sagiv, +972-9-776-6618
CFO
investors@retalix.com

Jerry Finkelstein, New York Power Broker, Dies at 96

Jerry Finkelstein, who made a fortune in business, real estate and newspapers, including The New York Law Journal and The Hill, and for many years was a self-styled Democratic power broker in New York City, died on Wednesday at his home in Manhattan. He was 96.

Jerry Finkelstein

His death was confirmed by his son Andrew J. Stein.

With money and connections drawn in a wide-ranging career that placed him at the nexus of the legal profession, publishing and politics in New York, Mr. Finkelstein assisted presidents, governors, mayors, members of Congress, city and state officials and a host of judges, lawyers and lesser luminaries.

But he was instrumental to only one politician: his son Andrew, who shortened his surname and in campaigns heavily financed by his father became an assemblyman, Manhattan borough president and City Council president. Mr. Stein quit his last race, for the 1993 Democratic nomination for mayor, lacking public support. The incumbent, David N. Dinkins, won the primary but lost the general election to the Republican candidate, Rudolph W. Giuliani.

Mr. Finkelstein was the retired chairman of Struthers Wells, a conglomerate that manufactures a range of heating, fuel handling and thermal engineering equipment, and the owner of a newspaper chain that includes The Hill in Washington. He derived much of his power from The Law Journal, which he acquired in 1963 and built into the leading publisher of New York's court decisions, with news and analyses of legal affairs.

For all his considerable influence, Mr. Finkelstein ran for office only once - for a State Senate seat in 1942 - and lost. He held a few appointive posts. But for 30 years in New York, he was a man to see for political support, votes, a favor, a job or a friend with connections.

For President John F. Kennedy, he helped raise money for what became the Kennedy Center for the Performing Arts. For President Lyndon B. Johnson, he helped pick a patronage dispenser. He promoted the mayoral campaigns of Robert F. Wagner and John V. Lindsay, raised money for Senator Robert F. Kennedy's 1968 presidential race, and served as a conduit to the Democrats for Gov. Nelson A. Rockefeller, a liberal Republican.

Mr. Finkelstein was born in New York on Jan. 26, 1916. His father, Albert, ran a small business. He attended George Washington High School and New York University and graduated from New York Law School in 1938, but did not take the bar exam. He became a reporter for The New York Daily Mirror, and with a colleague, Seward Brisbane, son of the Hearst editor Arthur Brisbane, founded The Civil Service Leader, a newspaper for public employees, in 1939.

In 1942, he married Shirley Marks. She died in 2003. Besides Mr. Stein, he is survived by another son, James Finkelstein, eight grandchildren and two great-grandchildren.

He managed the 1949 re-election campaign of Mayor William O'Dwyer, who, before resigning in a scandal in 1950, named Mr. Finkelstein chairman of the City Planning Commission.

In 1963, Mr. Finkelstein bought The Law Journal, the official paper of the city's legal profession, for $1 million. Its circulation was small, and it was an ocean of tiny print: legal notices, case calendars, texts of decisions. But he turned it into a leading journal, and he wielded enormous power by deciding which cases to publish, in effect determining what the bar read - a leverage not lost on judges, lawyers and politicians.

Mr. Finkelstein built his fortune in a series of ventures. In the 1950s, he borrowed $85,000 and, with the help of friends on Wall Street, bought the Fifth Avenue Coach Company for $5 million. He later sold his stock in it for $990,000. He then went into public relations with Tex McCrary, the columnist and radio and television personality. They helped a client, Louis A. Chesler, a stock speculator, with some difficulties he had with the Securities and Exchange Commission. The commission later reported that Mr. Finkelstein had earned $2.3 million in Chesler stock speculations.

As Miller Drops Out, Race for S.E.C. Chief Shifts

The field of candidates to run the Securities and Exchange Commission is shifting as a contender drops out of the race.

Mary Miller, a senior Treasury Department official, removed her name from consideration in recent days, according to several people briefed on the matter who were not authorized to discuss the process. While some Washington insiders considered Ms. Miller a top choice, several people close to her said she was “not interested” in the job.

With Ms. Miller withdrawing, Sallie L. Krawcheck, a long-time Wall Street executive, has emerged as a potential front-runner. Over the last year, she has become a familiar face in Washington, making the rounds with lawmakers to discuss consumer issues.

The White House, which has been interviewing for the role in recent weeks, is vetting a number of possible candidates with backgrounds in finance and government.

Robert Khuzami, the S.E.C.'s enforcement director, is a favorite choice among some ag ency officials. Richard Ketchum, the head of the Financial Industry Regulatory Authority, Wall Street's self-policing organization, is also a long-shot contender. The search is still in its early stages, and the candidates could change as the White House narrows its choices.

Washington and Wall Street have been abuzz with speculation about the next S.E.C. chief since Mary L. Schapiro, the agency's current chairwoman, announced her resignation on Monday. President Obama quickly named Elisse B. Walter, a Democrat who became an S.E.C. commissioner in 2008, as the new chief of the agency.

While Ms. Walter will step into the role on a full-time basis, she has told agency officials that she plans to serve for a short time. The White House, which faces more pressing cabinet-level nominations, is expected to name an S.E.C. successor next year.

The president's choice for the job will send a strong message to Wall Street and the broader financial markets. He could se lect a candidate with a strong regulatory hand and a critical voice to help police the industry. Or the administration could opt for a compromise candidate.

Ms. Krawcheck, 48, could fit that bill. In addition to having extensive Wall Street credentials, she is known for her independent streak and consumer advocacy efforts.

Since her departure from Bank of America in late 2011, Ms. Krawcheck has stepped up her presence in Washington and even hired an aide to help her navigate the political arena. Last week, she met with key members of the Senate Banking Committee, which oversees the S.E.C. It is possible Ms. Krawcheck is being considered for other jobs other than head of the S.E.C., according to people briefed on the matter who spoke on condition of anonymity.

Still, she lacks government experience. Her banking résumé, too, may prove problematic given the anger of many in Washington and Main Street over Wall Street's role in the 2008 financial crisis.

Some liberal lawmakers are expected to raise concerns that regulators, including the S.E.C., are taking aim at some of Ms. Krawcheck's past employers. She has been personally named along with former bank colleagues in litigation stemming from her time at both Bank of America and Citigroup.

Ms. Krawcheck first started on Wall Street as an investment banker at Salomon Brothers, switching a few years later to Donaldson, Lufkin & Jenrette. She made a name for herself as an analyst at Sanford C. Bernstein, a research firm. At Bernstein, she covered the banking industry and often issued negative calls on firms like Citigroup. In 2001, she was named the chief executive at Bernstein, making her one of the top women on Wall Street.

A year later, during a scandal over Wall Street research, she became head of research and brokerage at Citigroup, a step the bank took to improve its credibility. She worked her way up at Citigroup, taking over as chief financial officer and then eventually as head of the wealth management division. But she left the bank in September 2008 after clashing with top executives who were reluctant to reimburse clients who lost money on certain Citigroup investments.

In 2009, Ms. Krawcheck landed at Bank of America, where she ran the wealth management group. Under her leadership, the unit posted steady results, a point of strength for then-troubled bank. But Ms. Krawcheck was ousted from Bank of America in late 2011 as part of a broader management shake-up.

Since then, Ms. Krawcheck has refined her voice as a consumer advocate. On Twitter, she has drawn a significant following with her conversational style and posts on investment issues. Ms. Krawcheck is on the board of Motif Investing, an online brokerage firm geared to individual investors.

She also writes a blog on LinkedIn. One recent dispatch, titled “What I Learned When I Got Fired (The First Time),” offered career guidance from her own r ocky periods.

“If you haven't been fired at least once, you're not trying hard enough,” she wrote. “As the pace of change in business increases, the chances of having a placid career are receding. And if in this period of rapid change, you're not making some notable mistakes along the way, you're certainly not taking enough business and career chances.”

The next head of the S.E.C. faces a challenging agenda.

Ms. Schapiro, who stepped down after a difficult four-year run, overhauled the agency and brought it back from the brink. During her tenure, she revamped the enforcement division and replaced the leadership team.

But the new chairman must now tackle high-speed trading and complex financial products that have proved tough to police. The S.E.C. must also play catch up on a series of rule-writing efforts required under the Dodd-Frank Act, the sweeping regulatory overhaul passed after the financial crisis.

In Fledgling Agency, a Potential Monitor for Wall St. Regulators

The financial industry is obsessed with President Obama's second-term regulatory appointments. Who will be Treasury secretary? Who could head the Federal Housing Finance Administration? But hardly anyone is paying much attention to the Office of Financial Research.

This entity was created by the Dodd-Frank Act to conduct independent research on the sweeping risks to the financial system. Ah, right, another group of Washington wonks who will issue reports carrying vague warnings of risks looming sometime in the uncertain future. Yawn. I hadn't paid much attention either.

But then I spoke to Ross Levine, an economist and specialist in regulation at Haas School of Business at the University of California, Berkeley, and I finally got it. The Office of Financial Research is a great idea. And as I grasped it, I felt a minor sense of horror, as when you see a precious ring slip off a finger in slow motion and go down the drain while you are powerless to stop it.

< p>The office is looking as if it will be a tool of the financial services industry, instead of a check on it. Its main role is to serve the Financial Stability Oversight Council, providing the systemic risk overseer with data and analysis of where the nukes are buried.

But the Office of Financial Research was hobbled from the get-go by a poor design. It is housed in the Treasury Department, while ostensibly being independent of it. It has a small budget. And it has to report to the very regulators it is supposed to report on.

This month, it announced its advisory committee. Thirty big names charged with giving the fledgling operation direction and gravitas. But these same people have also compromised it.

By my count, 19 of the 30 committee members work directly in financial services or for private sector entities that are dependent on the industry. There are academics, but many of them have lucrative ties to the financial services industry. I noted only one financial industry critic: Damon A. Silvers, the policy director for the A.F.L.-C.I.O.

“Academics with a history of challenging regulators are not there,” said Anat R. Admati, a finance professor at Stanford and the co-author, with Martin Hellwig, of the forthcoming call to arms, “The Banker's New Clothes” (Princeton University Press). She was among several prominent banking critics who had applied but didn't make the cut.

The Treasury Department sees it differently.

“We were not looking for critics or proponents. That wasn't the goal,” said Neal S. Wolin, the Treasury deputy secretary. “We were looking for people with a range of perspectives who understand keenly the systemic risks in the financial system.”

Mr. Wolin said that the office would be independent despite its home. The argument for being housed in the Treasury Department is that if it were all by its lonesome, brand new and small, it would much easier to be squashed like a bug.

Maybe. But it's not as if there isn't a precedent for creating a better advisory council: Sheila Bair did it for another regulator, the Federal Deposit Insurance Corporation. That panel, the Systemic Resolution Advisory Committee, has Professor Admati; Paul A. Volcker; John S. Reed, the former co-chief executive of Citigroup and now a prominent banking apostate; and Simon Johnson, the former head economist for the International Monetary Fund and outspoken banking nemesis.

Perhaps Professor Admati and Mr. Johnson and Mr. Volcker were busy. The world is teeming with expert critics of Big Banking; they just aren't heard from much in the halls of Washington. The Federal Reserve Banks of Kansas City and Dallas have candidates. The economist Joseph Stiglitz would make a good choice. The Bank of England houses two prominent banking critics, Andy Haldane and Robert Jenkins. Outfits like Better Markets or Demos could nominate people who would give Jamie Dimon some i ndigestion.

Certainly, financiers are not a monolithic lot. Investors often have differing interests from those of banks, and investment banks from commercial banks, and the small from the large. Even in big institutions, there are secret sharers of anti-Wall Street sentiment. And obviously, an advisory committee requires a certain number of experts with real-world experience.

Clearly, there is a place for finance professionals. But shouldn't the balance of the committee be tilted in the opposite direction and give greater voice to the critics and the banking skeptics? This is a panel that is supposed to identify giant risks in the system that bankers ignore in their pursuit of profit and bonuses and to spot flaws in regulations that could cost the public and economy trillions.

It's not as if the poor bankers don't have a voice in Washington, after all. The bankers have the resources. And they are focused. Bankers are in the trenches all day, fighting regul ation. The public only glances at these battles.

So why does yet another Washington advisory panel of worthies matter? Mr. Levine has a subtle and fascinating answer. He starts by pointing to the mystery of the home-team advantage in sports, which has long puzzled researchers.

It turns out that umpires are biased toward the home team not out of conscious or recognizable bias. Rather, they subconsciously gravitate toward their immediate “community” - in this case, the home-field crowd, especially at crucial moments in a game. (Researchers will next study how this appears to have no effect whatsoever on the New York Jets.)

To minimize the bias, you can tell the umpires that they are being monitored. Introduce instant replay. With that, you have expanded the community that is watching the umpires to an audience far beyond the home crowd.

Mr. Levine believes that the Office of Financial Research could do the same for regulators. If it independently ex amined and publicized not just systemic risks, but - crucially - the flaws in how the regulators were approaching those risks, that could have the effect of expanding the regulators' community. Regulators, he said, “operate within financial services industry. They are surrounded by it.”

“That means that the home-field crowd is the financial services industry,” he said. “The public, if it has a ticket at all, is way up in bleachers, and its voice can't be heard.”

The Office of Financial Research is well on its way to barring the gate.

Before the crisis, the consensus was that the Office of Thrift Supervision was the regulator most in the pocket of Big Banking. For its efforts, it got shut down as part of the postcrisis regulatory overhaul.

“Now, the title of ‘Most Captured' is up for grabs,” Mr. Johnson said. “And I think we have a contender.”

Securities and Exchange Commission Weighs Suing SAC Capital

Federal regulators are preparing a civil fraud case against SAC Capital Advisors, the $14 billion hedge fun run by the billionaire investor Steven A. Cohen, according to a call that the fund held with its investors on Wednesday morning.

SAC said that it had received a so-called Wells notice from the Securities and Exchange Commission, an indication that the agency is considering an enforcement action against the hedge fund.

Last week federal prosecutors accused Mathew Martoma, a former SAC portfolio manager, with corrupting a doctor who provided him with confidential data on a drug trial. The secret information, authorities say, allowed SAC to earn millions and avoid losses totaling $276 million. For the first time in the government's years of investigating SAC over improper trading, the charges connected Mr. Cohen to questionable trades.

The S.E.C. also filed a parallel civil case against Mr. Martoma and CR Intrinsic, the SAC unit that employed Mr. Marto ma.

A spokesman for SAC Capital, Jonathan Gasthalter, has said, “Mr. Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government's inquiry.”

On the call, Tom Conheeney, the president of the SAC, said that Mr. Cohen had been deposed by the S.E.C. related to this matter earlier in the year, and been responsive to all of the commission's questions.

A Wells notice from the S.E.C. relates to possible civil action does not imply that the Justice Department is preparing a criminal case against SAC or Mr. Cohen.

Getco Offers to Buy Knight for $3.50 a Share

Getco on Wednesday offered to buy the Knight Capital Group in a deal that values the firm at about $635 million, three months after it helped rescue the trading concern from the brink of bankruptcy.

The buyout bid is one of at least two expected for Knight this week, with a second offer expected from another trading firm, Virtu Financial. Both companies are keenly interested in Knight's market-making trading operations, though they may sell less-desirable parts of their rival.

Under terms outlined in a letter to Knight's board on Wednesday, Getco proposed offering both cash and stock in a deal valued at about $3.50 each.

Getco's chief executive, Daniel Coleman, would hold that title in the combined company. Knight's own chairman and chief executive, Thomas Joyce, would become nonexecutive chairman.

“I am convinced that this merger would unlock tremendous value for the shareholders of both firms while establishing a global leader in market-making a nd agency execution,” Mr. Coleman wrote in the letter.

Getco said that it has lined up $950 million in financing from “a large financial institution.”

Shares in Knight leaped more than 19 percent in premarket trading on Wednesday, to $3.54. That suggests that investors expect a higher takeover bid from Getco or another suitor.

SAC\'s Conference Call for Investors

The hedge fund SAC Capital Advisors is holding a conference call with investors on Wednesday morning to address the latest insider trading charges leveled at a former employee, DealBook's Peter Lattman reports. A conference call is an unusual move for a hedge fund, but, according to Bloomberg News, investors are particularly concerned about the case against Mathew Martoma, a former SAC portfolio manager. For the first time, the government has linked the hedge fund's founder, Steven A. Cohen, to questionable trades.

Mr. Cohen “remains committed to managing money for clients,” Mr. Lattman reports. About 40 percent of SAC's $14 billion under management comes from outside clients, who face restrictions on withdrawing money. Mr. Cohen has not been charged with wrongdoing, and it was unclear whether he would participate in the conference call. Executives at SAC “have already reached out to the firm's largest investors t o calm concern” about the ostensibly improper trades, Bloomberg News reports.

 

BLANKFEIN GOES TO WASHINGTON  |  Lloyd C. Blankfein, the chief executive of Goldman Sachs, has been on something of a media tour recently to warn about the so-called fiscal cliff. Now, he is headed to the White House, along with other business leaders, to talk about ways to avoid the spending cuts and tax increases set to take effect at the start of next year, according to Bloomberg News. Speaker John Boehner and other House Republican leaders are also said to be scheduled to meet with the chief executives.

Morgan Stanley's boss, James P. Gorman, is taking a different approach. Mr. Gorman wrote a memo to Morgan Stanley's employees asking them to pressure lawmakers to reach a compromise, according to The Wall Street Journal. “No issue is more critical right now for the U.S. economy, the glo bal financial markets and the financial well-being of our clients, which is why I am asking you to participate in the democratic process and make your voice heard,” the chief executive said, according to the newspaper.

 

MEGAFON'S SHARES FALL IN DEBUT  |  MegaFon, the Russian cellphone operator, got a chilly reception from investors on Wednesday, as its shares fell in the first day of trading. The company had priced its shares at $20 apiece, the bottom of its expected range, and raised $1.7 billion in the I.P.O. Last week, Steven M. Davidoff discussed concerns about the offering in a Deal Professor column.

 

ON THE AGENDA  |  Stephan Leithner, Deutsche Bank's chief compliance officer, is scheduled to appear before a German parliamentary committee examining rate manipulation. Edw ard DeMarco, the acting director of the Federal Housing Finance Agency, speaks at the Exchequer Club in Washington in 12:30 p.m. Workday, which went public last month, reports earnings after the market closes. Warren E. Buffett is on CNBC at 8:30 a.m. James Chanos of Kynikos Associates joins Howard Lutnick, chief executive of Cantor Fitzgerald, and Lawrence H. Summers in a discussion about Washington's fiscal troubles on Bloomberg TV at 4 p.m. Data on new home sales in October is to be released at 10 a.m.

 

ARGENTINA'S DEBT MESS  |  Thanks to a United States court ruling, Argentina may be approaching another default. The country's long-running battle with a group of hedge funds became even messier last week, when a judge ruled that, if the government makes a scheduled $3 billion payment to bondholders on Dec. 15, it would also have to set aside $1.33 billion for the hedge funds , which own older bonds. Argentina is not expected to pay the hedge funds, including Elliott Management and Aurelius Capital Management, which its politicians have called “vultures.”

The situation is now “chaos,” Steven M. Davidoff writes in the Deal Professor column. Argentina's stock market has fallen, and credit-default swaps on its debt have skyrocketed in price. The case offers “a lesson on the hazards of United States courts' interfering in international affairs,” Mr. Davidoff writes. “The Federal District Court overseeing this case through a decade of tiring litigation seems more focused on cramped legal interpretations and the morality of debt than on the wider consequences of its rulings.”

 

FACEBOOK'S MOVE INTO E-COMMERCE  |  Wall Street analysts have started saying positive things about Facebook, months after its disappointing debut on the publi c market. That is in part because of its new Gifts service, which allows users in the United States to buy presents for their friends. Somini Sengupta reports in The New York Times: “If it catches on, the service would give Facebook a toehold in the more than $200 billion e-commerce market. Much more important, it would let the company accumulate a new stream of valuable personal data and use it to refine targeted advertisements, its bread and butter.”

 

A NEW LEADER FOR GROUPON?  |  Andrew Mason, Groupon's colorful chief executive, is in the hot seat. According to AllThingsD, several Groupon board members have been “seriously discussing making major leadership changes,” including possibly hiring a new chief executive. The board has a meeting on Thursday, when it may discuss such matters. Pressure has mounted on Mr. Mason in the wake of Groupon's accounting issues, and as the stock price has fallen more than 80 percent since the I.P.O. last year. AllThingsD cautions that any move to remove Mr. Mason “is not likely to happen immediately, if at all,” and “any changes are likely to be done with his involvement.”

 

 

 

Mergers & Acquisitions '

Cnooc and Nexen Resubmit Deal Plans to U.S. Regulators  |  The move gives United States regulators more time to review the proposed merger, The Financial Times reports. FINANCIAL TIMES

 

ConAgra's Chief Emphasizes Lure of Private-Label Brands  |  It may have taken a year and a corporate spinoff, but ConAgra has succeeded in buying Ralcorp. And it could not have c ome soon enough for ConAgra's chief executive, Gary Rodkin, who sees Ralcorp's strength in private-label brands as an important part of his own company's future. DealBook '

 

Head of Financial Times Group to Step Down  |  Rona Fairhead, the chief executive of Pearson's Financial Times Group, will step down in April, the company says. Hers will be the second prominent departure in recent months. DealBook '

 

Viacom Promotes Its Head of M.&.A. to Chief Financial Officer  | 
WALL STREET JOURNAL

 

INVESTMENT BANKING '

Moynihan's Spotty Memory  |  Bank of America's chief executive, Brian T. Moynihan, was pressed by a lawyer in a deposition connected to the bank's legal battle with MBIA. Mr. Moynihan often said he did not recall certain details, leading the lawyer to ask if the chief executive would say he had a good memory. ROLLING STONE

 

Bets on Financial Firms Pay Off for Fairholme Fund  |  Bruce Berkowitz and his Fairholme fund are poised for a 30 percent gain this year after betting on stocks like A.I.G. and Bank of America, Bloomberg News reports. BLOOMBERG NEWS

 

What Citigroup's Chairman Might Be Planning  |  Michael O'Neill, the chairman of Citigroup, who is now “effectively running” the bank after leading a successful effort to oust Vikram S . Pandit as chief executive, may draw on strategies he has previously used as he tries to turn the company around, Reuters reports. These include “the ruthless pruning of underperforming operations and deciding which ones are worth additional investment.” REUTERS

 

PRIVATE EQUITY '

Carlyle Raises New Energy Fund  |  The Carlyle Group raised $1.38 billion for a fund to lend to energy projects and companies, Reuters reports. REUTERS

 

Carlyle May Sell Stake in China Pacific Insurance, Credit Suisse Says  | 
WALL STREET JOURNAL

 

HEDGE FUNDS '

< span class="title">Green Mountain Coffee Defies Short-Sellers  |  Green Mountain Coffee Roasters, which has been a target of criticism by the hedge fund manager David Einhorn, reported a higher profit on Tuesday, sending its shares up more than 20 percent. BLOOMBERG NEWS

 

Hedge Funds Are Optimistic About Greek Debt Holdings  |  Talk of a Greek debt restructuring has some hedge funds expecting significant gains from their Greek bonds, Reuters reports. REUTERS

 

I.P.O./OFFERINGS '

SolarCity Sets Price Range for I.P.O.  |  The company aims to price shares at $13 to $15 apiece, and it would raise about $151 million at the top end of th e range, Reuters reports. REUTERS

 

Sinopec Plans to Take Unit Public in Hong Kong  |  The Chinese energy giant Sinopec is planning an I.P.O. next year for its refining and petrochemical engineering unit that could raise about $1.5 billion, The Wall Street Journal reports, citing four unidentified people with direct knowledge of the matter. WALL STREET JOURNAL

 

VENTURE CAPITAL '

Lift, Start-Up Backed by Obvious Corporation, Raises $2.5 Million  |  Lift, which aims to help “people achieve their goals,” raised $2.5 million in a financing round led by Bijan Sabet of Spark Capital, TechCrunch reports. The company has previously been funded by the Obvious Corporation, t he accelerator created by co-founders of Twitter. TECHCRUNCH

 

LEGAL/REGULATORY '

Autonomy's Ex-Chief Calls on H.P. to Defend Claims  |  In a public letter, Mike Lynch again rejected H.P.'s claims about Autonomy and argued that Hewlett-Packard botched the takeover of his former company and mishandled its integration. DealBook '

 

Tax Changes Are Expected to Prompt Share Buybacks  |  The New York Times reports: “A number of academics and investors, and a new industry s urvey, suggest that companies are likely to shift more money to buybacks after this year because taxes on those gains are expected to grow less than a proposed tax increase on dividends.” NEW YORK TIMES

 

Europe Moves to Impose Stricter Rules on Credit Rating Agencies  |  Bloomberg News reports: “Credit rating companies face curbs on when they can assess government debt and restrictions on their ownership under draft plans agreed upon by the European Union to limit the industry's influence and tackle conflicts of interest.” BLOOMBERG NEWS

 

Spanish Lenders Get Approval for Government Bailouts  |  The European Union is allowing Bankia, Novagalicia Banco and Catalunya Banc to be recapitalized next month. BLOOMBERG NEWS

 

Questions Surround Stock Trades by Executives  |  The rules governing executives who buy and sell shares of their own companies “are so flawed they have left a confusing landscape that can both raise suspicions about trades that are innocent, and provide cover for others that are less so,” The Wall Street Journal writes. WALL STREET JOURNAL

 

Shares in Russia\'s MegaFon Fall After I.P.O.

MOSCOW â€" Investors on Wednesday balked at the initial public offering of MegaFon, Russia's second largest cell phone operator, as the company's shares fell in the first day of trading.

The Russian cellphone operator, whose majority owner is Alisher Usmanov, one of Russia's richest men, had valued its priced its stock at $20 a share, the bottom of the expected price range. The offering has been beset by several issues including regulatory approval delays. The I.P.O. raised $1.7 billion, making it Europe's second largest offering this year after Telefónica Deutschland raised $1.9 billion last month.

Yet despite MegaFon's pricing aimed at enticing investors, shareholders remained unimpressed.

MegaFon's shares, which are jointly traded in Moscow and London, fell almost 2 percent, to $19.63, in morning trading in Europe.

The new listing, which is the largest Russian I.P.O. since the aluminum maker Rusal raised $2.2 billion in 2010, comes at a difficu lt time for the European financial markets.

The European debt crisis has hampered efforts by a number of companies to tap investors for cash. The total raised in I.P.O.'s in Europe this yearâ€" $14.2 billion - represents a 63 percent decline compared to the same period last year, according to data provided by Dealogic.

“Europe is constrained by the euro crisis,” Clifford Tompsett, a capital markets partner at the consultancy PricewaterhouseCoopers in London, said. “It's not an attractive place to launch an I.P.O.”

For MegaFon, the share sale is the end of a protracted process.

The Russian company was forced to postpone its roadshow last month after British authorities took longer than expected to approve the new listing. Goldman Sachs also withdrew from the offering, initiating a rare spat in the I.P.O. market.

The American investment bank did not publicly disclose it reasons. But Goldman Sachs had worried a planned restructuring of Mr. Usmanov's conglomerate would weaken corporate governance at the cell phone company, according to person familiar with the decision, who spoke on the condition of anonymity because he was not authorized to speak publicly.

An aide to Mr. Usmanov who declined to be cited by name because regulators have imposed a silent period on MegaFon around the I.P.O., said MegaFon simply chose other banks because Goldman was slow in conducting its pre-I.P.O. analysis of the company.

“When the train was leaving the station, Goldman was left on the platform,” said another person with direct knowledge of the matter.

The acrimony did not blunt investors' initial interest.

MegaFon's I.P.O had been oversubscribed, and a single large American investor scooped up more than 10 percent of the 84.5 million new shares, according to a person with direct knowledge of the matter, who declined to be identified because he was not authorized to speak publicly about the purchase.

“It's a decent asset in a good market,” Igor Semyonov, a telecoms analyst at Deutsche Bank in Moscow, said of MegaFon.

MegaFon had marketed its shares in a roadshow by emphasizing its lead in wireless data transmissions in Russia. The company is a bet Russian consumers will continue buying devices like smart phones and iPads at a brisk clip.

The Russian cellphone operator also asserted it can execute a strategy of “leapfrogging” ahead of developed markets in providing much of the population with wireless broadband, because few Russians have broadband of any type today.

About 39 percent of Russians have broadband provided over telephone or cable wires, compared to 72 percent of Western Europeans, according to a MegaFon presentation to investors. As that gap closes, some new Russian customers might choose the convenience of wireless Internet, rather than a land-line service.

“People are buying second devices, and they are using data very extensively,” Mr. Semyonov, the Deutsche Bank telecoms analyst, said of mobile phones and tablet computers, a core market for MegaFon's wireless data service. “Whether it will replace fixed broadband at home, I wouldn't go that far.”

MegaFon's domestic competitors, Mobile TeleSystems and Vimplecom, are both listed on the New York Stock Exchange.

In total, MegaFon sold a 15.2 percent stake through the I.P.O. The Swedish telecoms company TeliaSonera is selling down its stake in MegaFon in the offering. But to raise confidence in MegaFon, TeliaSonera's chief executive and president and a member of the MegaFon board, Lars Nyberg, said he would invest $2 million of his own money in the IPO

“I have a strong belief in the future prospects of MegaFon,” Mr. Nyberg said in a statement. He called the investment “a way for me to show my commitment.”

Despite the gloom in Europe's financial markets, several large listings across the Continent have suc ceeded in recent months. The European Central Bank's unlimited bond-buying program begun in late August has helped to gradual reopen the financial markets and breathe life into European economies.

Recent successes include Telefónica Deutschland, the German unit of the Spanish telecoms giant, which raised $1.9 billion last month and the British insurer DirectLine, which also pocketed $1.4 billion through an I.P.O. Both offerings were valued at the lower end of their respective price ranges.

“The backing of the E.C.B. and reduced volatility in European stock markets have really helped to improve sentiment,” said Martin Steinbach, head of I.P.O.'s for Europe, the Middle East and Africa at the accounting firm Ernst & Young. “Confidence is slowly coming back.”

Morgan Stanley and Sberbank, a Russian state bank, are acting as joint coordinators while Citigroup, Credit Suisse and VTB, another Russia state bank, served as bookrunners.

Andrew Kramer re ported from Moscow and Mark Scott from London.

To Save H.P., Break It in Two

Bill George is a professor of management practice at Harvard Business School and a former chairman and chief executive of Medtronic.

Hewlett-Packard's $8.8 billion write-down of its Autonomy acquisition is just the latest evidence of the steady decline of one of the world's great companies. Don't blame Meg Whitman, the chief executive. She is just cleaning up the messes created since 1999 by her three predecessors and H.P.'s strategically challenged board of directors.

For more than thirty years, Hewlett-Packard served as my role model of a company. Having met David Packard in 1969, I deeply admired his, and Bill Hewlett's, philosophy of “management by wandering around” and “The Hewlett Way.”

Like the founders of my former company Medtronic, Hewlett and Packard started in a garage. They never forgot that the company was an egalitarian organization focused on innovations that met their customers' needs. Trying to compete with H.P. in its prime was very difficult because of its innovative products, superior customer service and product quality.

The founders also created a financial model that enabled the company to sustain its growth for 40 years: grow revenue at 20 percent, maintain 20 percent operating margins, and reinvest approximately 10 percent of revenue in research and development. Their internally groomed successors, John A. Young and Lewis E. Platt, carried on their philosophy for another twenty years.

In 1999, everything changed. Based on a consultant's recommendation, the board decided to spin off its core business of test, measurement and medical instruments in order to focus on the rapidly growing computer business.

Wanting to shift its culture, the board passed over several internal candidates to bring in Carly Fiorina from AT&T and its Lucent spinoff. She quickly abandoned The Hewlett Way, moving aggressively to reshape the company as a prominent marketer of computer equipment and enterprise systems. Her fateful move was acquiring Compaq Computer, despite the objections of several board members, in order to become the leader in low-cost personal computers.

Ms. Fiorina tried to focus simultaneously on high-end enterprise systems. The split focus was costly. In its bid to buy the business consulting practice of PricewaterhouseCoopers, H.P. lost out to I.B.M. As time continued, Hewlett's growth and profitability stagnated.

Ms. Fiorina was succeeded by NCR's Mark V. Hurd, who focused on near-term sales growth and cost reduction, doubling the company's earnings and stock price. Mr. Hurd also acquired Electronic Data Systems' computer services capabilities, an unfortunate deal that led to an $8 billion write-down in 2012. The company's investment in R&D, meanwhile, fell to 2.3 percent from 4 percent.

When Mr. Hurd resigned after admitting he had violated company standards, the board hastily hired Léo Apotheker, the failed co-chief execut ive of the enterprise software giant SAP. Mr. Apotheker proposed selling the company's PC business and dropping its tablets and smartphones to concentrate on systems and software. He acquired the British software maker Autonomy for $10 billion.

His strategies caused such controversy that he was terminated after only 11 months and succeeded by a board member, Ms. Whitman, the former eBay C.E.O. and unsuccessful Republican candidate for governor of California.

Ms. Whitman has tried to stabilize Hewlett-Packard's management and strategy by facing the issues forthrightly. She is cleaning house and cutting costs, while deferring hopes for a turnaround until 2014. The company's share price has continued to fall, hitting a low in November of $11.35, 79 percent below its 2010 high water mark.

With 330,000 employees and $120 billion in revenue, H.P. has become too big to manage.

It is really two businesses: a commodity personal computer and printer business an d an enterprise systems, services and software business. The characteristics of these businesses are entirely different.

The commodity business requires low costs and aggressive distribution through multiple channels combined with rapid new product introductions, qualities incompatible with the company's historically high cost structure and cumbersome organization.

The enterprise systems business requires heavy investments in research and development, including very sophisticated software (an area where H.P. is sorely lagging behind I.B.M., Oracle and SAP), high touch customer service and an expensive support structure to meet its customers' complex needs.

The time is ripe to split the company into two businesses - enterprise systems and computer hardware - each with roughly $60 billion in revenue, positive cash flow and solid profitability.

Ms. Whitman could run enterprise systems, using her strengths in software and customer relationships to restore the company to its original roots and The Hewlett Way.

Upon being spun off, the new computer hardware company could be run by Todd Bradley, executive vice president of the printing and personal systems group and a former chief of Palm. He could create a leaner, more competitive company to take on Dell, Lenovo and the Japanese printer companies. And the restructuring could eliminate as much as $1 billion of corporate overhead required to manage H.P.'s current set of businesses.

In its current form, Hewlett-Packard is a wasting asset, whose value to customers, employees and shareholders is steadily declining. It is time for the board to move quickly to restore its former status as a company everyone can admire, one that can compete successfully in two very different global markets.

If it does so, Hewlett-Packard's beleaguered shareholders will finally benefit from a substantial jump in the combined market valuation of the separate companies.

Smith & Nephew to Buy Healthpoint Biotherapeutics for $782 Million.

28 November 2012

Smith & Nephew plc (LSE: SN, NYSE: SNN), the global medical technology business, today announces that it is strengthening its global position in advanced wound care by entering into an agreement through its subsidiaries to acquire substantially all the assets of Healthpoint Biotherapeutics (“Healthpoint”), a leader in bioactive debridement, dermal repair and regeneration wound care treatments, for $782 million in cash.

Commenting, Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said:

“The acquisition of Healthpoint is an important step for Smith & Nephew.  Strategically, it reinforces our Advanced Wound Management division by giving us a strong position in the fast growing area of bioactive wound care treatment.  It brings material revenues from a fast growing product range, an attractive pipeline, and commercial and R&D capabilities upon which we will build.  The combination benefits our customers, offering them a truly unique wound care business â€" having leadership positions across exudate and infection management, negative pressure and bioactives.”

The acquisition has compelling strategic and financial rationale for Smith & Nephew:

• Creates a strong position in bioactives, the fastest growing area of advanced wound management
• Brings a complementary range of bioactive debridement, dermal repair and regeneration products generating around $190 million 2012 revenues growing at a double digit percentage rate, driven by SANTYL ointment
• Adds an established R&D capability in next-generation bioactive therapies including an exciting product pipeline with lead product (HP802-247) entering Phase 3 trials
• Integration into our Advanced Wound Management (“AWM”) division
  ‐ doubles AWM's US sales, strengthening commercial scale and capabilities
  ‐ strong cultural fit of innovation and customer focus
  ‐ opportunity for synergies over time
• Expected to exceed Smith & Nephew's cost of capital in the third full year following acquisition; broadly EPSA neutral in 2013 and accretive thereafter

Paul Dorman, Founder, Chairman and co-owner of Healthpoint commenting on the transaction said:

“Healthpoint and Smith & Nephew have much in common â€" our commitment to innovation, the desire to serve healthcare professionals and a fundamental dedication to improving the quality of life for patients.  We are very proud of our employees and the business we have built and believe now is the right time to allow it to grow to the next level by joining a global organisation like Smith & Nephew.”
Strategic rationale

One of Smith & Nephew's five strategic priorities is ‘supplementing our organic growth through acquisitions', in order to satisfy our determination to build significant value for our stakeholders.

Our strong Advanced Wound Management division has been consistently outperforming the market growth rate for the last few years.  This is despite not having a presence in bioactive wound healing, which has an estimated segment size of around $1 billion and is the fastest growing segment of advanced wound care.  Bioactives offer novel treatments for a range of hard to heal wounds, including the large and increasing prevalence of diabetic foot ulcers.

In Healthpoint, we have found the ideal entry into this attractive segment. It is complementary on many levels, including product range, US scale and strong commercial capabilities.

Healthpoint is forecast to generate around $190 million sales in 2012 from its existing range of high growth products, driven by SANTYL, a bioactive ointment for the removal of dead tissue in wounds.  Healthpoint has a strong R&D capability with its lead product candidate entering Phase 3 trials for the treatment of venous leg ulcers, a large potential opportunity. 

The combination creates a wound business which is unique â€" having leadership positions across exudate and infection management, negative pressure and bioactive wound care.

Details of Healthpoint

Healthpoint is a privately held company focused on the development and commercialisation of novel, cost-effective bioactive solutions for debridement, dermal repair and regeneration.

Its principal marketed product is Collagenase SANTYL® Ointment (“SANTYL”), an enzymatic debrider for dermal ulcers and burns.  Healthpoint's offering also includes the OASIS® family of leading acellular skin substitutes for venous leg ulcers and diabetic foot ulcers and REGRANEX®, a growth factor for treating diabetic foot ulcers.

The company's research and development strategy is centred on next-generation bioactive therapies for the treatment of chronic wounds.  The principal pipeline product is HP802-247 for the treatment of venous leg ulcers, using cell-based therapy containing keratinocytes and fibroblasts.  In August 2011 Healthpoint reported positive data from a Phase 2b clinical trial for HP802-247 in the treatment of venous leg ulcers, demonstrating that the compound met both its primary and secondary endpoints. The compound has recently entered Phase 3 trials for this indication and commercial launch could occur as early as 2017.

Healthpoint has its headquarters in Fort Worth, Texas and is an affiliate company of DFB Pharmaceuticals, Inc.  It has approximately 460 employees, including an established sales force of 215. 

Healthpoint generated revenues of $151 million in the year to 31 December 2011 and is forecast to deliver around $190 million in 2012.  We expect that Healthpoint's current product portfolio will deliver growth at a mid-teen percentage rate for the next few years.  It delivered a trading profit of $11 million ($34 million before R&D expenses) in 2011.  We expect to realise the benefit of the significant operational gearing in Healthpoint's cost structure.

As at 31 December 2011, Healthpoint had gross assets of $98 million and net operating assets of $61 million.  All figures are unaudited.

Integration plans

Smith & Nephew intends to build upon Healthpoint's strong presence in the US, established commercial organisation and complementary product range.  The business will continue to be headquartered in Fort Worth. 

We will continue to invest in Healthpoint's bioactive R&D capability, including funding the HP802-247 Phase 3 trials and commercialisation over the next 5 years.  We expect this investment will drive annual R&D spend in the medium term to around $40-50 million per annum.

Healthpoint will be integrated into our Advanced Wound Management division.  In order to minimise business disruption, we intend to integrate gradually. We expect to achieve annual cost synergies of around $20 million by 2015 and incur integration cash costs over this period of around $25 million.

Financial implications

The purchase price of $782 million in cash will be financed from Smith & Nephew's existing cash resources and bank facilities.  In the event that the transaction is not completed by the end of 2012, a further $10 million consideration will be paid.

The transaction is value and growth enhancing for Smith & Nephew.  It is expected to generate a return exceeding Smith & Nephew's cost of capital in the third full year following acquisition, and to be broadly EPSA neutral in 2013 and accretive thereafter, including the significant R&D investment in HP802-247.

The acquisition is structured as the purchase of assets (mainly in US), which will provide Smith & Nephew with a material cash tax benefit.

Smith & Nephew expects the anti-trust clearances and other customary requirements, to be fulfilled in time to enable completion of the transaction by the end of 2012.

Deutsche Bank is serving as financial adviser to Smith & Nephew on the transaction and BofA Merrill Lynch and JP Morgan as financial advisers to Healthpoint.

Analyst conference call

A conference call to discuss this announcement will be held at 8.30am GMT / 3.30am EST today, 28 November. This will be broadcast live on the company's website and will be available on demand shortly following the close of the call at http://www.smith-nephew.com.  If interested parties are unable to connect to the web, a listen-only service is available by calling +44(0)20 3364 5381 (passcode 9377430) in the UK or +1 212 444 0895 (passcode 9377430) in the US.  Analysts should contact Jennifer Heagney on +44 (0) 20 7960 2255 or by email at jennifer.heagney@smith-nephew.com for conference call details.

Enquiries

Investors 
Phil Cowdy  +44 (0) 20 7401 7646
Smith & Nephew 
 
Media 
Charles Reynolds  +44 (0) 20 7401 7646
Smith & Nephew 
 
Andrew Mitchell / Justine McIlroy +44 (0) 20 7404 5959
Brunswick 

Technical glossary

Acellular skin substitute
Artificial skin made of a matrix or scaffold composed of material such as collagen which does not contain cells (as oppose to ‘cellular' products which contain living cells).
Bioactive wound care
Bioactives are innovative technologies for the prevention and treatment of acute, chronic and burn-related wounds. These are typically hard to heal wounds, including the large and increasing prevalence of diabetic ulcers.  As such, bioactive wound healing is the fastest growing segment of advanced wound care.  The broad category of such products includes those designed to enhance the body's natural healing processes and bio-engineered products.
Cell-based therapy
The repair, replacement or restoration of damaged tissue through the use of cells that have been manipulated or altered.  The cell source can be: autogenic (same patient), allogenic (same species donor) or xenogenic (another species donor).
Debridement
The process of removing dead or infected tissue from a wound in order to speed healing.  Debridement can be carried out in a number of ways, such as with a scalpel (surgical debridement), water (hydrosurgery), or the use of bioactives or chemicals to dissolve the tissue.

About Healthpoint Biotherapeutics

Healthpoint Biotherapeutics is a biopharmaceutical company focused on the development and commercialization of novel, cost-effective solutions for debridement, dermal repair and regeneration. The company's research and development strategy is centred on next-generation bioactive therapies for the treatment of chronic wounds. Currently marketed products include Collagenase SANTYL Ointment, OASIS Wound Matrix, OASIS Ultra Tri-Layer Matrix and REGRANEX (becaplermin) Gel 0.01%.  Healthpoint Biotherapeutics is also committed to advancing the care and treatment of wounds through support of industry leading continuing education from The Wound Institute®.   Healthpoint Biotherapeutics is a DFB Pharmaceuticals, Inc., affiliate company, and is based in Fort Worth, Texas. For more information, visit the company website at www.healthpointbio.com.

® Healthpoint and related logo, SANTYL, The Wound Institute and REGRANEX are registered trademarks of Healthpoint, Ltd.  OASIS is a registered trademark of Cook Biotech, Inc.

About Smith & Nephew

Smith & Nephew is a global medical technology business dedicated to helping improve people's lives.  With leadership positions in Orthopaedic Reconstruction, Advanced Wound Management, Sports Medicine and Trauma, Smith & Nephew has almost 11,000 employees and a presence in more than 90 countries. Annual sales in 2011 were nearly $4.3 billion.  Smith & Nephew is a member of the FTSE100 (LSE: SN, NYSE: SNN).

◊ Trademark of Smith & Nephew.  Certain marks registered US Patent and Trademark Office.

Forward-looking Statements

This document may contain forward-looking statements that may or may not prove accurate.  For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements.  Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements.  Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith & Nephew, these factors include: economic and financial conditions in the markets we serve, especially those affecting health care providers, payors and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or oth er government actions; product defects or recalls; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; strategic actions, including acquisitions and dispositions, our success in integrating acquired businesses, and disruption that may result from changes we make in our business plans or organisation to adapt to market developments; and numerous other matters that affect us or our markets, including those of a political, economic, business or competitive nature.  Please refer to the documents that Smith & Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith & Nephew's most recent annual report on Form 20-F, for a discussion of certain of these factors.

Any forward-looking statement is based on information available to Smith & Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith & Nephew are qualified by this caution.  Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith & Nephew's expectations.

Smith & Nephew to Buy Healthpoint Biotherapeutics for $782 Million.

28 November 2012

Smith & Nephew plc (LSE: SN, NYSE: SNN), the global medical technology business, today announces that it is strengthening its global position in advanced wound care by entering into an agreement through its subsidiaries to acquire substantially all the assets of Healthpoint Biotherapeutics (“Healthpoint”), a leader in bioactive debridement, dermal repair and regeneration wound care treatments, for $782 million in cash.

Commenting, Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said:

“The acquisition of Healthpoint is an important step for Smith & Nephew.  Strategically, it reinforces our Advanced Wound Management division by giving us a strong position in the fast growing area of bioactive wound care treatment.  It brings material revenues from a fast growing product range, an attractive pipeline, and commercial and R&D capabilities upon which we will build.  The combination benefits our customers, offering them a truly unique wound care business â€" having leadership positions across exudate and infection management, negative pressure and bioactives.”

The acquisition has compelling strategic and financial rationale for Smith & Nephew:

• Creates a strong position in bioactives, the fastest growing area of advanced wound management
• Brings a complementary range of bioactive debridement, dermal repair and regeneration products generating around $190 million 2012 revenues growing at a double digit percentage rate, driven by SANTYL ointment
• Adds an established R&D capability in next-generation bioactive therapies including an exciting product pipeline with lead product (HP802-247) entering Phase 3 trials
• Integration into our Advanced Wound Management (“AWM”) division
  ‐ doubles AWM's US sales, strengthening commercial scale and capabilities
  ‐ strong cultural fit of innovation and customer focus
  ‐ opportunity for synergies over time
• Expected to exceed Smith & Nephew's cost of capital in the third full year following acquisition; broadly EPSA neutral in 2013 and accretive thereafter

Paul Dorman, Founder, Chairman and co-owner of Healthpoint commenting on the transaction said:

“Healthpoint and Smith & Nephew have much in common â€" our commitment to innovation, the desire to serve healthcare professionals and a fundamental dedication to improving the quality of life for patients.  We are very proud of our employees and the business we have built and believe now is the right time to allow it to grow to the next level by joining a global organisation like Smith & Nephew.”
Strategic rationale

One of Smith & Nephew's five strategic priorities is ‘supplementing our organic growth through acquisitions', in order to satisfy our determination to build significant value for our stakeholders.

Our strong Advanced Wound Management division has been consistently outperforming the market growth rate for the last few years.  This is despite not having a presence in bioactive wound healing, which has an estimated segment size of around $1 billion and is the fastest growing segment of advanced wound care.  Bioactives offer novel treatments for a range of hard to heal wounds, including the large and increasing prevalence of diabetic foot ulcers.

In Healthpoint, we have found the ideal entry into this attractive segment. It is complementary on many levels, including product range, US scale and strong commercial capabilities.

Healthpoint is forecast to generate around $190 million sales in 2012 from its existing range of high growth products, driven by SANTYL, a bioactive ointment for the removal of dead tissue in wounds.  Healthpoint has a strong R&D capability with its lead product candidate entering Phase 3 trials for the treatment of venous leg ulcers, a large potential opportunity. 

The combination creates a wound business which is unique â€" having leadership positions across exudate and infection management, negative pressure and bioactive wound care.

Details of Healthpoint

Healthpoint is a privately held company focused on the development and commercialisation of novel, cost-effective bioactive solutions for debridement, dermal repair and regeneration.

Its principal marketed product is Collagenase SANTYL® Ointment (“SANTYL”), an enzymatic debrider for dermal ulcers and burns.  Healthpoint's offering also includes the OASIS® family of leading acellular skin substitutes for venous leg ulcers and diabetic foot ulcers and REGRANEX®, a growth factor for treating diabetic foot ulcers.

The company's research and development strategy is centred on next-generation bioactive therapies for the treatment of chronic wounds.  The principal pipeline product is HP802-247 for the treatment of venous leg ulcers, using cell-based therapy containing keratinocytes and fibroblasts.  In August 2011 Healthpoint reported positive data from a Phase 2b clinical trial for HP802-247 in the treatment of venous leg ulcers, demonstrating that the compound met both its primary and secondary endpoints. The compound has recently entered Phase 3 trials for this indication and commercial launch could occur as early as 2017.

Healthpoint has its headquarters in Fort Worth, Texas and is an affiliate company of DFB Pharmaceuticals, Inc.  It has approximately 460 employees, including an established sales force of 215. 

Healthpoint generated revenues of $151 million in the year to 31 December 2011 and is forecast to deliver around $190 million in 2012.  We expect that Healthpoint's current product portfolio will deliver growth at a mid-teen percentage rate for the next few years.  It delivered a trading profit of $11 million ($34 million before R&D expenses) in 2011.  We expect to realise the benefit of the significant operational gearing in Healthpoint's cost structure.

As at 31 December 2011, Healthpoint had gross assets of $98 million and net operating assets of $61 million.  All figures are unaudited.

Integration plans

Smith & Nephew intends to build upon Healthpoint's strong presence in the US, established commercial organisation and complementary product range.  The business will continue to be headquartered in Fort Worth. 

We will continue to invest in Healthpoint's bioactive R&D capability, including funding the HP802-247 Phase 3 trials and commercialisation over the next 5 years.  We expect this investment will drive annual R&D spend in the medium term to around $40-50 million per annum.

Healthpoint will be integrated into our Advanced Wound Management division.  In order to minimise business disruption, we intend to integrate gradually. We expect to achieve annual cost synergies of around $20 million by 2015 and incur integration cash costs over this period of around $25 million.

Financial implications

The purchase price of $782 million in cash will be financed from Smith & Nephew's existing cash resources and bank facilities.  In the event that the transaction is not completed by the end of 2012, a further $10 million consideration will be paid.

The transaction is value and growth enhancing for Smith & Nephew.  It is expected to generate a return exceeding Smith & Nephew's cost of capital in the third full year following acquisition, and to be broadly EPSA neutral in 2013 and accretive thereafter, including the significant R&D investment in HP802-247.

The acquisition is structured as the purchase of assets (mainly in US), which will provide Smith & Nephew with a material cash tax benefit.

Smith & Nephew expects the anti-trust clearances and other customary requirements, to be fulfilled in time to enable completion of the transaction by the end of 2012.

Deutsche Bank is serving as financial adviser to Smith & Nephew on the transaction and BofA Merrill Lynch and JP Morgan as financial advisers to Healthpoint.

Analyst conference call

A conference call to discuss this announcement will be held at 8.30am GMT / 3.30am EST today, 28 November. This will be broadcast live on the company's website and will be available on demand shortly following the close of the call at http://www.smith-nephew.com.  If interested parties are unable to connect to the web, a listen-only service is available by calling +44(0)20 3364 5381 (passcode 9377430) in the UK or +1 212 444 0895 (passcode 9377430) in the US.  Analysts should contact Jennifer Heagney on +44 (0) 20 7960 2255 or by email at jennifer.heagney@smith-nephew.com for conference call details.

Enquiries

Investors 
Phil Cowdy  +44 (0) 20 7401 7646
Smith & Nephew 
 
Media 
Charles Reynolds  +44 (0) 20 7401 7646
Smith & Nephew 
 
Andrew Mitchell / Justine McIlroy +44 (0) 20 7404 5959
Brunswick 

Technical glossary

Acellular skin substitute
Artificial skin made of a matrix or scaffold composed of material such as collagen which does not contain cells (as oppose to ‘cellular' products which contain living cells).
Bioactive wound care
Bioactives are innovative technologies for the prevention and treatment of acute, chronic and burn-related wounds. These are typically hard to heal wounds, including the large and increasing prevalence of diabetic ulcers.  As such, bioactive wound healing is the fastest growing segment of advanced wound care.  The broad category of such products includes those designed to enhance the body's natural healing processes and bio-engineered products.
Cell-based therapy
The repair, replacement or restoration of damaged tissue through the use of cells that have been manipulated or altered.  The cell source can be: autogenic (same patient), allogenic (same species donor) or xenogenic (another species donor).
Debridement
The process of removing dead or infected tissue from a wound in order to speed healing.  Debridement can be carried out in a number of ways, such as with a scalpel (surgical debridement), water (hydrosurgery), or the use of bioactives or chemicals to dissolve the tissue.

About Healthpoint Biotherapeutics

Healthpoint Biotherapeutics is a biopharmaceutical company focused on the development and commercialization of novel, cost-effective solutions for debridement, dermal repair and regeneration. The company's research and development strategy is centred on next-generation bioactive therapies for the treatment of chronic wounds. Currently marketed products include Collagenase SANTYL Ointment, OASIS Wound Matrix, OASIS Ultra Tri-Layer Matrix and REGRANEX (becaplermin) Gel 0.01%.  Healthpoint Biotherapeutics is also committed to advancing the care and treatment of wounds through support of industry leading continuing education from The Wound Institute®.   Healthpoint Biotherapeutics is a DFB Pharmaceuticals, Inc., affiliate company, and is based in Fort Worth, Texas. For more information, visit the company website at www.healthpointbio.com.

® Healthpoint and related logo, SANTYL, The Wound Institute and REGRANEX are registered trademarks of Healthpoint, Ltd.  OASIS is a registered trademark of Cook Biotech, Inc.

About Smith & Nephew

Smith & Nephew is a global medical technology business dedicated to helping improve people's lives.  With leadership positions in Orthopaedic Reconstruction, Advanced Wound Management, Sports Medicine and Trauma, Smith & Nephew has almost 11,000 employees and a presence in more than 90 countries. Annual sales in 2011 were nearly $4.3 billion.  Smith & Nephew is a member of the FTSE100 (LSE: SN, NYSE: SNN).

◊ Trademark of Smith & Nephew.  Certain marks registered US Patent and Trademark Office.

Forward-looking Statements

This document may contain forward-looking statements that may or may not prove accurate.  For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements.  Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements.  Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith & Nephew, these factors include: economic and financial conditions in the markets we serve, especially those affecting health care providers, payors and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or oth er government actions; product defects or recalls; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; strategic actions, including acquisitions and dispositions, our success in integrating acquired businesses, and disruption that may result from changes we make in our business plans or organisation to adapt to market developments; and numerous other matters that affect us or our markets, including those of a political, economic, business or competitive nature.  Please refer to the documents that Smith & Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith & Nephew's most recent annual report on Form 20-F, for a discussion of certain of these factors.

Any forward-looking statement is based on information available to Smith & Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith & Nephew are qualified by this caution.  Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith & Nephew's expectations.