Johnson & Johnson (JNJ) shares closed down 1.42% at $263.81 on Friday, October 23, the day the Financial Times reported that talks to merge J&J’s orthopaedics unit with Smith & Nephew (SN) had collapsed over who would run the combined company.
The talks ended several weeks ago, so only the disclosure is new. According to Reuters, the two sides had agreed on the main financial terms, which valued J&J’s hip and knee business at up to $22 billion, nearly twice Smith & Nephew’s £9.4 billion ($12.58 billion) market value.
The Sticking Point Was J&J’s Own Pick
The plan had Namal Nawana running the combined company. Smith & Nephew wouldn’t accept that and wanted its own CEO, Deepak Nath, to keep the job.
Nawana isn’t just any candidate. He ran Smith & Nephew for about 18 months until 2019, and J&J named him Worldwide President of DePuy Synthes in October 2025, when it announced plans to separate the unit. On the Q3 2026 earnings call on October 13, CFO Joe Wolk credited the momentum Nawana’s team is building and said J&J is “leaning towards a spin” as the best option for shareholders, with the separation on track for mid-2027.
What DePuy Synthes Is Worth to J&J
Orthopaedics brought in about $9.2 billion in 2024 and $2.345 billion in Q3 2026, up 3.2% as reported and 3.4% operationally. That’s a little over a quarter of J&J’s MedTech business, which grew from $27.06 billion in 2021 to $33.79 billion in 2025.
The reported $20 billion to $22 billion is small beside J&J’s $636 billion market cap, though what shareholders would actually receive depends on the deal structure, debt and taxes.
The multiple says more. At up to $22 billion, the proposed terms put orthopaedics at about 2.2x to 2.4x its 2024 sales. J&J as a whole trades at 6.27x forward revenue, 31% above its five-year average of 4.77x. The reported price points to a substantially lower sales multiple for orthopaedics. For scale, half of J&J’s 6.27x multiple applied to the unit’s $9.2 billion in 2024 sales implies about $29 billion, though the revenue periods differ and the deal’s exact valuation basis isn’t public. J&J’s stated case for the separation is a faster-growing, higher-margin business without it.
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A Spin Means Shares, Not Cash
The obvious objection: J&J holders lose nothing here, since they get the unit’s value either way. That’s mostly right, but the form changes. A sale, like the roughly $20 billion deal Bloomberg reported J&J was discussing with Apollo Global Management (APO) in September, would have put a cash price on the business. A spin hands J&J shareholders DePuy stock instead, and its value will depend on what the market pays for a business growing in the low single digits.
That makes Zimmer Biomet (ZBH), the biggest listed pure play in hips and knees, the yardstick for a standalone DePuy, not J&J’s drug-driven multiple.
J&J’s December 8 Pro Forma Is the Next Test
Wolk said J&J will probably show a pro forma for the orthopaedics separation at its Enterprise Business Review on December 8, alongside its 2027 outlook. That matters more than Friday’s headline.
The collapse looks like a minor setback to me. J&J was already leaning toward a spin, and the reported $22 billion gives it a benchmark rather than a confirmed price. The number to watch on December 8 is how much faster the remaining company could grow without orthopaedics. A clear step up would strengthen the separation case, while DePuy’s standalone earnings, debt and eventual market valuation would help determine how a spin compares with the roughly $20 billion price discussed with Apollo.
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