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Smith & Nephew shares up on renewed bid talk

Last updated: 04:21 10 Jan 2011 EST, First published: 05:21 10 Jan 2011 EST

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Shares in Smith & Nephew (LON:SN) spiked 12 percent in early deals amid reports that it has rebuffed a takeover approach from America’s Johnson & Johnson valuing the replacement hip maker at around £7 billion.

The suggestion is the offer was pitched in between 750-800 pence a share range (current price 725 pence).

But so far there has been radio silence from the company, which is under pressure to clarify the situation.

Charles Weston, analyst at Numis Securities, remains sceptical of the merits of such a deal.

He told clients this morning: “An acquisition by J&J at this level would be significantly accretive, on our numbers, particularly including synergies, which could be high. 

“Combined, however, J&J would have a dominant market shares of 35-40 percent in hips and knees, and we believe that there may be resistance from competition commissions. 

“Furthermore, J&J has already been gaining ground on market leader Zimmer for several years, so we would question the necessity of such a move, particularly in a market in which pricing may be worsening structurally, rather than cyclically, and with sales disynergies likely in some regions. 

“Before this, it had been speculated that the most likely bidder would be Biomet, backed by its private equity owners (Blackstone, Goldman Sachs, KKR etc).”

At 10.20 am, S&N shares were trading at 726 pence, up 76 pence on the day.


 

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