Major Smith & Nephew investors call for break-up of medical device maker
Three of Smith & Nephew’s biggest shareholders are reportedly urging the FTSE 100 firm to break up if it cannot improve performance.
The top 20 investors called on the London-based medical equipment manufacturer to consider spinning off its orthopaedics unit, the Financial Times reported.
The division, which makes replacement hip and knee joints, is the company’s largest but also the slowest-growing compared to its other business lines of wound management and sports medicine.
Shareholders are said to have concerns over Smith & Nephew’s loss of market share in the US, where it makes the majority of its sales but is now the fourth-largest provider of replacement hips and knees.
Two investors reportedly said a private equity firm could be a potential buyer for the division, with one arguing that scenario “would be quite compelling”.
Swedish activist investor Cevian took a five per cent stake in Smith & Nephew in July. It argued the firm’s businesses were “fundamentally attractive” but had failed to generate value for shareholders.
The move raised questions over whether Smith & Nephew could ditch the London Stock Exchange for the US, given the Cevian’s history of pushing its portfolio companies to move their listings.
Smith & Nephew’s share price has tumbled 43 per cent over the last five years, during which time the firm has seen four chief executives.
The firm’s shares have slumped 14 per cent since it cut its annual growth forecast at the end of October and said it would keep struggling in 2025, blaming a slowdown in China.
“We have a well-formed strategy and a plan that we are diligently executing,” Rupert Soames, Smith & Nephew’s chair, told the FT. ”It encompasses all three of our business lines.”
US activist investor Elliott Management previously launched a campaign for the firm to break up in 2017.
Deepak Nath, who became Smith & Nephew’s CEO in April 2022, is trying to turnaround the company’s fortunes with a 12-point plan that includes rolling out new orthopaedics technology to claw back market share.