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Smith & Nephew shares surge on reports hedge fund Elliott has built up a stake

It is unclear how much of a stake in Smith & Nephew that Elliott owns or what its plans are for the company, Bloomberg reported
Smith & Nephew
Smith & Nephew has been the target of takeover speculation

Smith & Nephew PLC (LON:SN.) shares jumped following a media report that hedge fund Elliott Management Corp. has built up a stake in the artificial hip and knee maker.

It is unclear how much of Smith & Nephew the activist investor owns or what its plans are for the company, Bloomberg reported, citing sources. An investor is generally required to report a shareholding that exceeds 3% under UK disclosure rules.

READ: Smith & Nephew chief executive Olivier Bohuon to step down next year

“We do not comment on rumour or speculation and we do not comment on the identity of our investors other than those publicly disclosed,” Smith & Nephew said in an emailed statement.

Elliott also declined to comment on the report.

Shares in Smith & Nephew rose 3.85% to 1,410p in morning trading.

On Monday, Smith & Nephew said its chief executive would step down by the end of 2018 after seven years in the position.

The group, which has long been the target of takeover speculation, is currently working towards launching new technology to help it win business as it competes against larger US rivals in the orthopaedic replacement market. A key area of innovation for the company is in robotics.

Smith & Nephew an acquirer rather than a takeover target, says Citi

On the reports of Elliott’s stake, analysts at Citigroup said: “We make the following observations. The perennial question of splitting Smith & Nephew up: it has often been speculated that Smith & Nephew may be broken up into its core orthopaedic business (fiscal year 2016 revenue $3,436mln) and its wound business ($1,233mln).”

They added: “We think it is worth noting that Smith & Nephew has been consistent in its language that it sees itself as acquirer rather than target, and we would point out that given the highly challenged integration of Zimmer and Biomet, existing orthopaedic players may not be predisposed to such a transaction, while Stryker has been consistently taking market.”

Elliott's aggressive reputation 

Elliott has earned a reputation for its tough line on the businesses it invests in, having put pressure on Samsung to restructure, pushed for the hostile takeover of Dulux paint owner AkzoNobel, intervened in coach operator National Express and fought supermarket Tesco for damages stemming from a 2014 accounting scandal.

In August, Elliott called for an overhaul of BHP Billiton after raising its stake in the lender to 5%.

In April, a dispute with the head of Arconic led to the ousting of the aluminium parts maker’s chief executive Klaus Kleinfeld.

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