S&N shrugs off 'vulnerable' tag

MEDICAL devices group Smith & Nephew has come out fighting against City analysts who say the company is vulnerable to a takeover bid after its failed attempt to buy Swiss rival Centerpulse.

City analysts have claimed that the orthopaedic and wound care group is now open to predators in a market looking to consolidate, with some expecting a bid in the next 12 months. But sources close to S&N last week dismissed the idea as 'complete hogwash'.

The British company had put in a £1.6bn bid for Centerpulse, which if successful, would have made it the world's number three in the £14bn orthopaedics sector.

But US company Zimmer topped S&N's bid with a £2bn offer, and last week S&N chief executive Sir Chris O'Donnell announced that the company would not be raising its bid.

Peter Cartwright, analyst at stockbroker Williams de Broe, said: 'S&N is ripe to be taken over. It has exposed its weaknesses during the bid battle and there are several US companies, such as Johnson & Johnson and Stryker, who would be looking closely at it.' However, he added that potential bidders would be 'keeping their powder dry' for the time being to let the dust settle.

Max Herrmann of ING Financial Markets, part of the Dutch bank, said: 'The deal has raised interest in consolidation and companies will be looking at possible deals. However, whether a deal is completed is another matter. 'S&N is a good business, so a company such as Medtronic could be interested, but it is less likely to be a takeover target than a merger target.'

Sources close to S&N have dismissed any possibility of a takeover, saying larger companies such as Johnson & Johnson and Stryker would run into competition issues. They believe that smaller companies would not be interested in diluting their margins by taking on S&N.