US healthcare group Johnson & Johnson circles Smith & Nephew

Smith & Nephew faces pressure to make a stock exchange statement following reports that the FTSE 100 maker of replacement joints has received a takeover approach from a US rival. The British company declined to comment after it was reported that Johnson & Johnson, the New Jersey-based healthcare group, had made overtures at more than 750p a share before Christmas. Smith & Nephew is believed to have rejected the move from the business behind the Johnson's baby oil and Listerine brands, arguing that it undervalued the world's largest player in keyhole surgery and treatment of serious wounds. News of an approach from Johnson & Johnson follows months of takeover speculation that also saw the name of privately-owned Biomet brought into the frame. If Johnson & Johnson returns with a higher bid and US-based Biomet is persuaded to launch its own bid, it will represent a turning of the tables for Smith & Nephew, which made an abortive takeover approach for Biomet four years ago. Indeed, recent takeover speculation has viewed Biomet, rather than Johnson & Johnson, as the most likely bidder for Smith & Nephew. Suggestions of a Johnson & Johnson move are likely to reignite debate over two hot corporate issues. Last month there was concern about company disclosure following the rejection of a secret takeover bid for De La Rue, the Bank of England's banknote printer. The move on De La Rue by Oberthur Technologies, a French rival, also stirred concerns about foreign takeovers of British companies – an issue likely to rear its head again if Smith & Nephew becomes the subject of a bidding war involving two American firms. Vince Cable has launched a sweeping review aimed at curbing a short-term mentality in the City and looking at the vulnerability of top British corporations to opportunistic takeover bids from abroad. The business secretary has reopened the debate about whether foreign takeovers should face more obstacles in the wake of Cadbury's acquisition by Kraft, the US food group. The Takeover Panel has proposed forcing hostile bidders to publicise plans for their target, including potential factory closures and job cuts - following Kraft's rowing back from a promise to keep open a Cadbury factory in south-west England. Unions criticised the proposals, saying they did not go far enough and urging guideline changes to ensure foreign takeovers are judged on the basis of whether they are in the national interest. One of Smith & Nephew's US suitors, Biomet, admitted poor sales growth last week, in a statement that also dragged down its UK rival's stock to 650p, valuing the company at more than £5.7bn. Its rumoured suitor, Johnson and Johnson, is valued at $172bn (£111bn). US regulators have been an irritant for Smith & Nephew recently, after the Food and Drug Administration criticised the British firm for inadequate testing of hip replacement devices manufactured at a plant in Germany. Smith & Nephew said no patients had been affected, although the news put a further dampener on shares that had risen by nearly 20% in the last three months of 2010.