The US healthcare giant Johnson & Johnson (J&J) will face a battle if it launches a renewed bid for the joint-replacement specialist Smith & Nephew (S&N) that could value the company at £7bn. On Friday, S&N's share price closed at 685p, valuing the company at just over £6bn, but had hit 735p as speculation about an offer mounted.
A tentative approach last year was rejected as undervaluing the company. However, S&N has put its advisers on watch ahead of a possible battle. The company's board is said to be readying a defence against any predator.
A bid could also generate a similar controversy to that which bedevilled last year's bid for Cadbury by Kraft. The US food giant has since axed hundreds of British jobs, to the outrage of unions.
It would also again test the resolve of the Business Secretary, Vince Cable, who criticised the "short-termism" of the City when Cadbury fell to Kraft. J&J is worth nearly £110bn and has £6bn of cash so could easily swallow S&N.