Smith & Nephew shares get a shot in the arm on rumour Elliott is building a stake

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Smith & Nephew makes orthopaedic implants (Source: Getty)

Shares in medical device maker Smith & Nephew have risen to lead the FTSE 100 index today after reports that US hedge fund Elliott Management has built up a stake in the firm.

London-listed shares in the company, which makes artificial hips and knees, rose 4.12 per cent to 1,415p this morning.

Reports emerged yesterday that Elliott, a prominent activist investor, had a stake in the firm, but it was not clear how much or what its plans were. 

Elliott has taken up several high-profile campaigns including the long-running battle to try to make AkzoNobel accept a takeover offer from US rival PPG and an attempt to push mining giant BHP Billiton to replace its board.

Elliott and Smith & Nephew declined to comment on the rumours.

“Elliott’s formidable reputation clearly precedes it... in the belief that shareholder returns can be improved," said Russ Mould, investment director at AJ Bell.

“With Elliott so far declining to confirm whether it has a stake or not, it is hard to divine their intentions. However, Smith & Nephew’s prior public difficulties regarding the lofty salary of chief executive Olivier Bohuon, relatively modest earnings progression this decade and margins which lag those of the peer group all mean it is a potential target for an activist. Especially as its shares trade at a valuation discount to those of its major rivals – even if Bohuon has already taken a pay cut and announced he will step down at the end of 2018.”

Bohuon yesterday said he would leave the role after seven years at the company. The board has begun the search for his successor.

Read more: Shareholder activism outside the US is on the rise