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Smith and Nephew see more sector deals

Friday, August 01 15:57:40

Smith and Nephew (S and N), Europe's largest maker of artificial joints, expects continued deal-making in the medical technology sector but has not come under pressure from investors to sell out, its chief executive said today.

Olivier Bohuon, who has eschewed a wave of mergers sweeping the industry, said S and N had a bright future as a standalone group after reporting improved second-quarter results that came in just ahead of analyst expectations.

The British company is no stranger to bid talk, having been touted as a target, on and off, ever since receiving an approach from Unilever in 1968.

But the deal rumours have lately grown louder, with a wave of U.S. healthcare companies now striving to move their tax bases abroad in a tactic known as "inversion".

Reports that Stryker was considering such a move on S and N in May sent its shares surging, only for the U.S. rival to rule out bidding for six months.

S and N shares were up again on Friday, gained 3.7 percent by 1405 GMT.

While Bohuon sees no strategic case for getting bigger in orthopaedics for the sake of it, he acknowledged that inversion deals were likely to continue.

"Are we going to remain independent? It is not up to me to tell you that - I don't have the answer. But I believe we have a good future, we have great growth in front of us, we have a number of new programmes and I believe success is here," he told reporters in a conference call.

"I don't have any specific pressure from shareholders at this stage."

The company reported a 10 percent rise in second-quarter trading profit as it regained momentum after a weak start to the year, despite problems in wound management.

It made a quarterly trading profit of $255 million on revenue of $1.15 billion, up 7 percent from a year earlier.

A company-supplied survey of analysts had forecast trading profit of $250 million on revenue of $1.14 billion. Adjusted earnings per share of 20.4 cents, up from 18.0 cents a year, also came in above an expected 19.4 cents.

S and N took a $25 million provision for problems associated with its Renasys negative pressure wound therapy product and said it expected a $30 million hit to revenue this year. (Reuters)

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