Smith & Nephew at four-month high as activist investor Cevian buys stake

Swedish activist investor Cevian Capital has purchased a 5% stake in Smith & Nephew, causing shares in the medical equipment manufacturer to surge to a four-month high on Thursday.

In a 'notification of major holdings' regulatory filing on Thursday, Smith & Nephew revealed that Cevian now holds 43.9m shares in the company.

The purchase of the 5.021% stake is Cevian's first investment in the FTSE 100 company and makes the Swedish firm its third-largest shareholder. At Wednesday's closing price of 986.2p, the stake would have been worth around £433m.

The purchase by Cevian, whose stated strategy is to acquire large minority stakes in European listed companies "and work as an owner to advance long-term and sustainable value creation", follows an 8% drop in the share price since the start of 2024.

Smith & Nephew's business has been impacted severely by the pandemic over recent years, as demand for its orthopaedic products reduced on the back of a huge number of cancelled elective procedures. Prior to Thursday, the stock had dropped 18% over the past year and 43% over the past five years.

"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," said AJ Bell investment director Russ Mould.

“Cevian has previously taken positions in UBS, Vodafone and Aviva in an attempt to force change and the case for doing so at Smith & Nephew is presented by a near-40% decline in the share price over the last five years. The positive share price reaction to Cevian taking a position in Smith & Nephew demonstrates the market thinks an outside catalyst for a shake-up of the business would be no bad thing," Mould said.

He added that Smith & Nephew's improvement plan announced in 2022 has "not yet resulted in a material improvement in earnings and profitability", made worse by a "weak showing" in the US market.

The stock was up 7.3% at 1,058.62p by 1051 BST, a level not seen since 15 March.