Smith & Nephew falls on denial of £15bn Biomet merger

Smith & Nephew today finally answered calls to make a statement on the bid rumours swirling the company, saying it had not engaged in talks and sending its shares sliding 2½p to 682p.

The announcement swiftly wiped out this morning's 2% gain, when the artificial knee and hip maker took the second spot on the FTSE-100 after reports that it was set to start informal talks with US orthopaedics group Biomet about a £15 billion merger.

The Financial Services Authority this week began looking at unusually high recent trading patterns in S&N, which hit a record high of 739p on Monday when insiders said it had received a bid from Johnson & Johnson last month.

But today the company said: "Smith & Nephew has a long-standing policy of not commenting on press speculation, unless there is a regulatory obligation to do so.

"However, exceptionally, Smith & Nephew wishes to clarify that it is not engaged in any discussions which could lead to a merger or a takeover."

Savvas Neophytou, healthcare analyst at Panmure Gordon, said the latest reports could have been fed by deal-hungry merger and acquisition bankers trying to conjure up activity.

"Smith & Nephew has been a much coveted business — regularly the stock spikes with rumours that an approach has been made," he said.

"To us, the most likely scenario is that a bid might have been discussed by possible bidders, and getting the company to the negotiating table might be the motivation behind these recent media reports."

Smith & Nephew has been a hotbed for M&A intrigue over the past year, as big customers such as American hospital groups increasingly prefer to place big orders with single suppliers.

Credit Suisse analyst Christoph Gretler raised his target price for S&N from 740p to 800p earlier this week, saying: "M&A considerations are unlikely to cool down in light of the substantial benefits of further industry consolidation."