Break-up talk pushes S&N higher
Break-up speculation lifted Smith & Nephew on Friday.
S&N rose 2.4 per cent to 921.5p after Investec Securities said the medical devices maker would be worth around 15 per cent more if it were split into three.
Wound management, endoscopy and orthopaedics all have sufficient scale to operate individually, with distinct requirements and few group-level synergies, said Investec.
It reckoned S&N’s core orthopaedics division has underperformed because management’s investment and attention has been on higher growth areas.
The broker also noted that, before joining S&N in 2011, chief executive Olivier Bohuon had overseen Abbott Laboratories’ preparations to spin out its pharmaceuticals unit.
Potential spurs to split S&N would include full integration of its recent Artorocare acquisition, regulatory approval of its leg-ulcer therapy or another big purchase to support its orthopaedics business, it said.
Using peer valuations, Investec set a hypothetical break-up value of £12.67 on S&N shares.
“Whilst a break-up has not been suggested or discussed by management, we feel the markets are ready and supportive,” the broker told clients.