LONDON, March 3 (Reuters) - Plans by Stryker tolaunch a new $2 billion share buyback programme punctured hopesthe U.S. surgical implant firm would bid for rival Smith &Nephew, sending shares in the British group some 5percent lower on Tuesday.
"It probably tells you that the prospect of a deal hasreceded," said one analyst as the stock staged its sharpestone-day drop in four years.
Smith & Nephew, which has a market value of around $16billion, is a perennial target of takeover talk. It is arelatively small player in a consolidating healthcare sector andStryker has long been seen as a likely acquirer.
The U.S. company formally declared last May that it was notworking on a takeover offer, following earlier reports of itsinterest, which meant that under British takeover rules it couldnot make a bid for another six months.
The Smith & Nephew share price fall echoes a similarsituation with AstraZeneca last October, when a decisionby Pfizer to approve a new buyback programme deflatedbid hopes surrounding the British drugmaker.
Stryker Chief Executive Kevin Lobo said his company wascommitted to a capital allocation strategy that includedacquisitions, dividends and share repurchases.
"While M&A activity across the breadth of our product andservice offerings will remain the primary focus of our long-termgrowth strategy, this new authorisation recognises that thestrength of our balance sheet is sufficient to enable moresignificant share repurchases," he said in a statement.
Smith & Nephew also announced a small deal on Tuesday to buyits distributor in Colombia, following similar deals in Brazil,Turkey and India. Financial terms of the acquisition ofEuroCiencia Colombia were not disclosed.($1 = 0.6504 pounds) (Reporting by Ben Hirschler and Vikram Subhedar; editing bySusan Thomas)