Speculation reignited in S&N bid talks

Elizabeth Fournier
SPECULATION over the ongoing Smith & Nephew bid mystery continued yesterday, amid reports that Johnson & Johnson had upped its bid for the UK manufacturer of replacement hips and knees.

Despite a continued refusal to comment by the US pharmaceuticals company, Johnson & Johnson was widely reported to have revised its offer up to 800p per share from the 750p it is believed to have offered in December last year.

An 800p per share offer would value the company at more than £7bn, after the previous bid was rejected as too low.

The prosthetics supplier has often been the subject of bid rumours, particularly from large foreign companies. If targeted by Johnson & Johnson, the bid would be likely to receive attention from both the UK Takeover Panel and competition regulators in the US and Europe.

The most recent takeover rumours have centred on Johnson & Johnson and Biomet, with the latter’s debt liabilities believed to have discouraged S&N chief executive David Illingworth from welcoming an approach last year.

And in both December 2010 and earlier this month, shares in the company shot up when the market reacted to rumours of a sale.

The revived speculation will refocus attention on the Takeover Panel’s role in the offer. Although neither party is under any regulatory obligation to release a statement if the speculation is inaccurate, Smith & Nephew stepped forward on Friday to deny merger speculation.

This was despite a move of only four per cent in the company’s shares following speculation that its US rival Biomet had tendered an offer, well below the five per cent that is used as guidance in the Panel’s rules.

Late on Sunday the company line remained unchanged, with an S&N spokesman maintaining that a takeover bid was not on the table.

But if Smith & Nephew does move to consider a bid, or its share value makes a significant movement based on the rumours, then it will be pressed by the Panel to make an immediate announcement to the market.