- Activist Cevian builds 5% stake
- Sees significant long term value
- Shares jump 7%
Medical products maker Smith & Nephew (SN.) topped the FTSE leader board with the shares jumping 7% to £10.5 after activist investor Cevian Capital disclosed a 5% stake, making it the second largest shareholder in the group.
The shares are down around 13% over the last 12-months compared with a 7% gain in the FTSE 100 index as the knee and hip replacement specialist has struggled to improve performance in its key US market.
Since the eve of the pandemic, shares in Smith & Nephew have lost 45% of their value.
WHAT DOES THE ACTIVIST WANT?
Cevian partner Friederike Helfer said: ‘Smith & Nephew owns fundamentally attractive businesses in structurally growing markets, but the company has not generated shareholder value for many years.
‘Cevian sees the potential to create significant long-term value by improving the operating performance of the company’s businesses. We have high expectations for the board and management to realize this potential.’
Sweden-based Cevian is the largest activist investor in Europe managing around $17 billion of assets. In 2023 Cevian sold down its stake in Aviva (AV.) after successfully campaigning for the insurer to increase shareholder payouts.
Other holdings include a stake in Irish building materials group CRH (CRH), which moved its primary listing to the US, and education company Pearson (PSON).
EXPERT VIEW
AJ Bell investment director Russ Mould commented: ‘Activist investors often circle a struggling company so the news Sweden’s Cevian has taken a stake in medical devices firm Smith & Nephew shouldn’t come as a huge surprise.
‘The company was severely affected by the pandemic as elective procedures like hip and knee replacements were cancelled, reducing demand for its orthopaedic products. Lockdown also hit the company’s supply chain, as it did for many businesses.
‘Cevian is likely to hold management’s feet to the fire and may look for more ambitious targets than set out under the existing improvement plan. It could also push for a rationalisation of the company’s portfolio, which encompasses sports medicine and wound care alongside orthopaedic.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
