Activist investor Cevian takes stake in Smith & Nephew

Activist investor Cevian Capital has disclosed a stake in Smith & Nephew, sending shares in the London-listed manufacturer of medical devices up more than 7 per cent.

Stockholm-based Cevian had a 5 per cent stake in Smith & Nephew as of July 2, the maker of joint implants and surgical devices said on Thursday.

Smith & Nephew has been hit by supply issues in recent years, while it has also suffered from high executive turnover, with three chief executives in five years.

“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,” said Friederike Helfer, a partner in the fund.

The FTSE 100 company said it had “an open dialogue with our shareholders and will continue to engage with Cevian, as we do with all of our shareholders”.

Shares were up more than 7 per cent in morning trading in London on Thursday. Before, they had fallen almost a fifth over the past 12 months.

Cevian has previously taken long-term positions in companies including UBS, Vodafone and Aviva, and is expected to adopt a similarly long-term approach to its investment in Smith & Nephew. It manages assets of more than €14bn.

The Swedish-based activist has typically taken positions in businesses it believes have complicated organisational structures that it has sought to simplify.

Smith & Nephew is the second-largest company in the sports management and advanced wound management sectors, while it is the fourth-largest maker of hip and knee implants.

But its market capitalisation has fallen from £17.bn in 2019 to £8.6bn, with supply chain issues and changes at the top hitting the company’s performance.

This year it has had sluggish growth, with revenue coming in below analysts’ estimates in the first quarter of 2024, and it expects sales to grow by 5 to 6 per cent this year.

In a bid to retain talent, it awarded its US-based chief executive Deepak Nath a 30 per cent pay rise at its most recent general meeting, despite 43 per cent of shareholders voting against the plans.