Healthcare giant Johnson & Johnson is expected to launch a fresh assault on Smith & Nephew in a deal that values the FTSE 100 firm at more than £7 billion, it has been reported.
The US firm is understood to be considering making a formal offer for the group after a tentative approach was rejected last year, according to the Sunday Times.
A revised bid is expected to be worth at least 800p a share, well up on the previous approach of 750p a share, which is thought to have been rejected by Smith’s board on the grounds that it undervalued the company.
Shares in Smith soared to an all-time high of 735p last week following rumours that it had rejected a bid approach from Johnson & Johnson, although they later fell back to 685p.
But the speculated new offer by Johnson & Johnson may still be rejected, with Sebastian Jantet, an analyst at Investec Securities, saying a fair price for the company would be around £9 a share, valuing the leading maker of hip and knee replacements at £8 billion.
Smith’s board is also understood to have instructed its advisers to begin preparing a defence against a new takeover approach. The bid interest raises the possibility of another major British company going to an overseas rival after last year’s sale of Cadbury to US firm Kraft Foods.
It is also thought that a new offer by Johnson & Johnson could spark a bidding war for Smith, with other healthcare firms such as Biomet, Stryker and Zimmer also expected to enter the fray. Biomet is already rumoured to be mulling a tie-up with Smith, although it is not yet thought to have made a formal approach.
Hull-based Smith, which is more than 150 years old, makes more than 1,000 products for operations in 32 countries, specialising in joint replacements, the treatment of hard-to-heal wounds and products for use in endoscopy operations.
It is the world’s largest maker of products for arthroscopy, in which joints are operated on through a small incision. The group, which started life as a chemists’ shop, recorded sales of $3.8 billion (£2.5 billion) in 2009 and is the UK’s largest “medtech” specialist.
Johnson & Johnson has a medical devices division and owns a number of well-known UK household brands, including Listerine, Sudafed and Benecol. No-one from Smith & Nephew could be contacted to comment on the report.