Stryker rules out bidding for Smith & Nephew

Shares in London-listed orthopaedics firm Smith & Nephew see-sawed on Wednesday after potential suitor Stryker Corporation said it is not planning to bid for the company.

One hour earlier reports surfaced that Stryker was in the early stages of readying a multi-billion pound takeover offer and was putting together a financing package.

The reports also detailed that Stryker could use an inversion and relocate to the UK to cut tax – a technique that Pfizer unsuccesfully attempted.

The speculation pushed shares in Stryker, which makes equipment used in knee and hip surgery, 6pc higher to $85.98 in pre-market trading in New York while Smith & Nephew soared 11pc to £10.80 in early afternoon trading in London.

However, the gains were quickly lost after Stryker confirmed it would not be bidding. Smith & Nephew has been frequently touted as a takeover target.

The company said in a statement: "Stryker Corporation notes the recent speculation regarding a potential transaction involving Smith & Nephew plc ("Smith & Nephew") and recent movement in the share price of Smith & Nephew.”

“At the request of the UK Takeover Panel, Stryker confirms that it does not intend to make an offer for Smith & Nephew.”

Smith & Nephew's gains fell back to trade at 978p while Stryker edged lower to $82.80.

Under Panel rules it is the responsibility of the bidder to make an announcement if it is or is not interested in acquiring a company following market speculation.

Stryker is now prevented from making an approach or acquiring shares in Smith & Nephew for six months unless the UK company invites it back, there is a rival bidder or there are material adverse changes.

There has been a rash of consolidation amongst orthopaedic players as rising costs puts pressure on companies. Johnson & Johnson acquired Swiss based Synthes in 2011 for $21.3bn while Zimmer announced a $13.3bn takeover of rival Biomet in April.

J&J’s takeover of Synthes was subject to an lengthy regulatory process that lasted over a year and led to competition regulators forcing a significant part of the US company’s business to be disposed. The regulatory environment has made analysts question whether more large-scale M&A in the sector is possible.