LONDON (Reuters) - Plans by Stryker (N:SYK) to launch a new $2 billion (1.3 billion pounds) share buyback programme punctured hopes the U.S. surgical implant firm would bid for rival Smith & Nephew (L:SN), sending shares in the British group some 5 percent lower on Tuesday.
"It probably tells you that the prospect of a deal has receded," said one analyst as the stock staged its sharpest one-day drop in four years.
Smith & Nephew, which has a market value of around $16 billion, is a perennial target of takeover talk. It is a relatively small player in a consolidating healthcare sector and Stryker has long been seen as a likely acquirer.
The U.S. company formally declared last May that it was not working on a takeover offer, following earlier reports of its interest, which meant that under British takeover rules it could not make a bid for another six months.
The Smith & Nephew share price fall echoes a similar situation with AstraZeneca (L:AZN) last October, when a decision by Pfizer (N:PFE) to approve a new buyback programme deflated bid hopes surrounding the British drugmaker.
Stryker Chief Executive Kevin Lobo said his company was committed to a capital allocation strategy that included acquisitions, dividends and share repurchases.
"While M&A activity across the breadth of our product and service offerings will remain the primary focus of our long-term growth strategy, this new authorisation recognises that the strength of our balance sheet is sufficient to enable more significant share repurchases," he said in a statement.
Smith & Nephew also announced a small deal on Tuesday to buy its distributor in Colombia, following similar deals in Brazil, Turkey and India. Financial terms of the acquisition of EuroCiencia Colombia were not disclosed.