Smith & Nephew Inc. is reportedly being targeted by U.S. activist investor Elliott Management Corp., although any stake-building in the U.K.-based company has yet to breach the 3% mark at which point it has to be disclosed to the London Stock Exchange.

For years, takeover speculation has swirled around the maker of orthopedic knees and hips, which has been run by Olivier Bohuon since 2011. The CEO yesterday announced plans to leave the company by the end of 2018, sparking speculation as to who might take over the role.

Elliott is best known for its aggressive approach to recouping losses suffered as a result of Argentina's debt default in 2001. More recently, the U.S.-based activist fund built a 9% stake in Akzo Nobel, a Dutch chemicals and paint group, whose chairman Elliott attempted to remove via court procedures. A three-month truce between Elliott and Akzo was reached Aug. 16.

So-called activist funds in the U.S. are increasingly turning to European companies, stealthily building up shareholdings in a bid to enforce their view and drive valuations higher, often by shaking up management and company strategies.

Canaccord Genuity analyst Kyle Rose initiated coverage of Smith & Nephew with a "Buy" rating and a $42 price target, citing the strong foundation offered by its broad product portfolio. "Smith & Nephew is the only orthopedic player that has diversified its product portfolio to include a focus on wound care," Rose wrote in a note to clients.

The analyst pointed out that, while management has "steadfastly maintained" their intention to remain independent, any potential M&A or activist activity has the opportunity to support additional upside to Canaccord's valuation.

Elliott spokesperson Sarah Rajani declined to comment on the stake-building first reported by Bloomberg, when contacted by S&P Global Market Intelligence.

Smith & Nephew's peers in the orthopedics business include Stryker Corp. and Zimmer Biomet Holdings Inc.