Shares in Smith & Nephew soared almost 9 per cent yesterday after the medical device manufacturer’s bid for Biomet, a US rival, was thwarted by another bidder, raising expectations that the group could become a takeover target.

S&N issued a statement saying it had terminated talks on acquiring Biomet after the US manufacturer of artificial joints and limbs confirmed it had opted for a $10.9 billion (£5.6 billion) all-cash offer from a US private equity consortium.

It is not clear whether S&N buckled over price but sources close to the deal claimed that Biomet was nervous about potential delays that could ensue with an offer from S&N, such as competition concerns.

S&N blamed a series of accounting errors at Biomet that meant no set of audited accounts was available on which a listed company could base its offer. The errors related to an options backdating scandal that has rocked corporate America.

It said the private equity consortium, which includes Blackstone, Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs, was unconstrained by similar disclosure rules.

S&N’s failure to acquire Biomet has thrown the strategy of Chris O’Donnell, the chief executive, into chaos. He had aimed at becoming one of four leading players in the expanding $8.5 billion global hip and knee market.

S&N, which controls around 9.5 per cent of the market, was thwarted by Zimmer in an attempt to buy Centerpulse of Switzerland in 2003.

After the sale of Biomet there are no natural acquisition targets left for S&N, leaving it at a disadvantage to the three market leaders, DePuy, Zimmer and Stryker — all of which have more than 20 per cent.

Bankers said S&N’s failure to win the auction made the company more vulnerable to approaches itself and most pointed to private equity firms as the most likely candidates.

Seb Jantet, healthcare analyst at Investec, agreed that the bid’s failure had put the company back in play.

S&N insisted that it had a future as an independent company. A spokesman for the group said: “We believe we are strongly positioned today as a successful independent manufacturer, as demonstrated by our outperformance of the market for many years.’’

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