Smith & Nephew share price up as new US suitor emerges

By: Alice Young
Alice Young
Alice joined the Invezz team after motherhood convinced her to make a career change from actuary-ing. She brings a… read more.
on Jun 5, 2014
Updated: Apr 9, 2020, Thursday, June 5: Shares in Smith & Nephew (LON:SN) have climbed more than four percent in London this morning with Bloomberg reporting that Medtronic Inc (NYSE:MDT), one of the world’s largest manufacturers of medical devices, was evaluating a bid for the UK artificial hips and knees maker.

The news comes on the heels of Stryker Corp’s (NYSE:SYK) reported interest in Smith & Nephew which sent the FTSE 100 company’s shares soaring last month.
As of 09:34 BST, Smith & Nephew’s share price had gained 4.61 percent to 1,113.00p, outperforming the FTSE 100 blue-chip index which currently stands 0.21 percent lower at 6,804.44 points.
**Medtronic said to be evaluating bid**

Bloomberg yesterday quoted unnamed sources with knowledge of the matter as reporting that Minneapolis-based Medtronic was evaluating a takeover of Smith & Nephew which could see the US company move its tax domicile to the UK.
One of the sources reportedly described Medtronic as a more serious bidder for the UK group than Stryker, which recently was forced to formally confirm that it had no plans to approach Smith & Nephew after a report in the Financial Times suggested that the Michigan-based company was preparing a bid. (Smith & Nephew share price rises as Stryker CEO confirms interest)

Under the UK Takeover Panel rules, Stryker is now prevented from approaching Smith & Nephew for six months unless invited by the FTSE 100 group.
Both Stryker’s and Medtronic’s reported takeover interest comes amid ongoing consolidation amongst orthopaedic companies. Smith & Nephew itself recently completed the acquisition of Texas-based medical device company ArthroCare.

**Tax inversion deals**
A potential takeover bid from a US suitor for Smith & Nephew would follow Pfizer Inc’s (NYSE:PFE) failure to convince AstraZeneca’s (LON:AZN) board of the benefits of a merger.

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As with Pfizer, Medtronic is expected to use a potential tie-up to cut its tax bill by redomiciling to the UK where companies enjoy more relaxed corporate tax rules as compared with the US.

In an interview with Bloomberg last month, Medtronic’s chief executive Omar Ishrak said that he would not rule out a tax inversion deal.
“Strategically, we do have this current problem that we have a lot of cash outside the US,” he told Bloomberg. “We encourage some kind of US tax reform that allows us access to that cash in a more reasonable way.”
Pfizer’s plans to relocate to the UK, however, prompted a backlash in the US with Senator Carl Levin of Michigan pledging to act to close a loophole currently allowing tax inversion deals. (AstraZeneca share price eases amid mounting political pressure on Pfizer)
**As of 09:30 BST, buy Smith & Nephew shares at 1107.00p.**
**As of 09:30 BST, sell Smith & Nephew shares at 1106.00p.**

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