Chaos over a... CEO seat, against the backdrop of a 34 billion dollar business deal, as the clash over who would take the reins of a new transatlantic medical technology colossus blew up negotiations between American Johnson & Johnson (J&J) and British Smith & Nephew.
At the center stood Rupert Soames, grandson of Winston Churchill and chairman of the British company, who insisted that Deepak Nath remain in the position of chief executive officer, rejecting the demand of J&J that its own head of the orthopaedics division, Namal Nawana, take over management.
The background of the clash
Smith & Nephew, a FTSE 100 index company, refused to accept the takeover of the new group's leadership by its former chief executive officer, Namal Nawana. The latter departed in 2019, after merely 18 months in the position, because the British medical device company could not meet his compensation demands.
American pharmaceutical company J&J sought to install Nawana, head of its orthopaedics division, in the position of new chief executive officer of the merged company. However, its smaller British competitor refused, stating that it would agree to the transaction only provided that its own chief, Deepak Nath, remained in the CEO post, according to the same sources.
The chairman of Smith & Nephew, Rupert Soames, who would continue to lead the board of directors, set this demand as a non-negotiable condition in negotiations, resulting in the retreat of interest from J&J.
Rupert Soames
The British company had approached J&J earlier in the year, proposing a combination with the orthopaedics division of the American group, according to people familiar with the matter. The proposed agreement valued the hip and knee replacement unit at up to 22 billion dollars, nearly double the market capitalization of Smith & Nephew, which stood at 9.4 billion pounds (12.6 billion dollars).
The proposal was submitted following the announcement by J&J, last year, that it intended to spin off or sell this specific division, which was formerly known as DePuy Synthes. The move was part of the 645 billion dollar company's strategy to focus on sectors with faster growth rates.
During the presentation of third-quarter financial results last week, the chief financial officer of J&J, Joe Wolk, stated that the company is now «leaning toward» spinning off the unit and creating a separate publicly traded company. In parallel, he acknowledged the contribution of Nawana to the recent improvement in the division's performance. Sales of the unit grew by 3.2% during the quarter.
The role of Soames
The case acquires additional interest due to the pressures facing Smith & Nephew regarding its performance and strategy. The company has found itself in the crosshairs of activist investor Cevian, while other shareholders have also called for the spin-off of its orthopaedics division, owing to its disappointing results.
Deepak Nath has rejected calls to break up the company, arguing that this specific division is now managed better. However, the stock market picture remains pressured, as shares of Smith & Nephew have retreated by 21% over a 12-month period, at a time when the FTSE 100 index has gained 13%.
In parallel, both Nath and Nawana have found themselves in the past at the center of controversies over senior executive compensation. When Nawana departed in 2019, Smith & Nephew had stated that it could not meet his expectations regarding his earnings and benefits, in comparison with what American medical device companies offered.
The compensation issue returned this year, as Smith & Nephew cited the risk of losing yet another chief executive officer due to disparities in earnings between Britain and the US. In this context, it raised the cap on Nath's total compensation to 15.3 million dollars starting in 2027, compared to 7.2 million dollars in 2025. The decision followed fierce shareholder reactions over his remuneration package in 2024.
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