Smith & Nephew in new takeover speculation

Another major British company finds itself in the takeover spotlight today after a report that the healthcare group Smith & Nephew had rejected an approach from its US rival Johnson & Johnson.

The leading maker of hip and knee replacements is said to have turned down an indicative offer worth £7bn several weeks ago, although Sky News added that the US firm was still considering whether to return with a higher offer. The speculation raises the possibility of another major British company going to an overseas rival after last year's sale of Cadbury to the US food giant Kraft.

The Hull-based Smith & Nephew, which is listed in the FTSE 100 index, has made no comment on a recent wave of bid speculation.

Its shares spiked in early December amid takeover rumours but fell back on Friday after a US peer, Biomet – which is seen as another potential suitor – reported slower sales growth.

Johnson & Johnson has a medical devices division and owns a number of well-known UK household brands, including Listerine, Sudafed and Benecol.

Its offer valued Smith & Nephew at 750p a share but this was rejected on the grounds that it substantially undervalued the firm, Sky said. Smith & Nephew also specialises in wound-care products such as dressings and gels.

It is thought that if Johnson & Johnson returned with a higher offer, then the likes of Biomet and other rivals such as Stryker and Zimmer may also be interested.

No one at Smith & Nephew, often tipped as a bid target for American rivals such as the privately owned Biomet, was available for comment and nor did Johnson & Johnson put out a statement.

Any bid would be seen as a test of the Business Secretary Vince Cable's willingness to intervene in a takeover on national interest grounds.

S&N shares closed at 654 pence on Friday, while on the New York Stock Exchange J&J ended at $62.60.