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Smith & Nephew Falls After Wells Says Medtronic Bid Unlikely

NEW YORK (TheStreet) -- Shares of British orthopedic device maker Smith & Nephew ((SNN)) are falling after Wells Fargo said it doesn't think that Medtronic ((MDT)) will look to buy the company. Earlier this week, Bloomberg reported that Medtronic, which makes various medical devices, was considering bidding for Smith & Nephew.

WHAT'S NEW: After speaking with management at the company's investor day, Wells Fargo analyst Larry Biegelsen reported that Medtornic said it would only enter a new market in which it believes it can be a top player. Smith & Nephew's hip and knee business is not large enough to fit those criteria, the analyst stated. Additionally, Medtronic did not seem eager to take advantage of the tax reduction that a Smith & Nephew acquisition could bring, Biegelsen stated. Conversely, research firm Summer Street believes that a bidding war for Smith & Nephew could erupt between Medtronic and Stryker ((SYK)), which said last week that it does not intend to make an offer for the British company at this time, but reserved the right to make a future bid. Summer Street raised its price target on Smith & Nephew to $112 from $100 and kept a Buy rating on the stock. Additionally, the firm thinks that if Stryker is not able to buy the British company, it could look to acquire another large cap name in the space. Boston Scientific ((BSX)) could be a top target for Stryker, according to Summer Street. Meanwhile, Lisa Clive, an analyst at research firm Bernstein, wrote that Smith & Nephew would try to oppose a takeover. Clive thinks the company could take several steps to defend itself, and she believes that these measures will deliver significant shareholder value in the near to medium term. The analyst kept an Outperform rating on the shares.

WHAT'S NOTABLE: Medtronic stated in slides earlier today that it would only pursue acquisitions that reduce its earnings minimally or not at all, and have risk adjusted returns that are at least in the mid teens.

PRICE ACTION: In early trading, Smith & Nephew fell 3.4% to $94. Shares of Medtronic are down 2% to $61.88 while Stryker is little changed at $85.27.

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