LONDON -(Dow Jones)- Shares in U.K.-based Smith & Nephew PLC (SN.LN) jumped 4% in early business Monday after the Sunday Times newspaper reported that U.S. pharmaceutical giant Johnson & Johnson (JNJ) is mulling a fresh takeover approach for Europe's largest manufacturer of replacement knees and hips.

The Sunday newspaper, which didn't identify its sources, said Johnson & Johnson is understood to be weighing a formal offer after a first tentative approach was rejected last year. A revised bid is expected to be worth at least 800 pence a share, valuing the company at just over GBP7 billion, it said, higher than the earlier approach of 750 pence.

J&J could face competition from privately-owned U.S. orthopedics group Biomet Inc., the newspaper said. Smith & Nephew has begun preparing a defense, it added.

The latest report comes after Smith & Nephew took the unusual step Friday of denying it was in any takeover talks after market speculation pushed its shares to record highs.

In a statement issued through the London Stock Exchange Friday, Smith & Nephew it "has a long-standing policy of not commenting on press speculation, unless there is a regulatory obligation to do so. However, exceptionally, Smith & Nephew wishes to clarify that it is not engaged in any discussions which could lead to a merger or a takeover."

Shares in the company nonetheless jumped early Monday after the weekend report. At 0826 GMT, the stock was up 4.1% or 28 pence at 713p. One week ago, market speculation pushed Smith & Nephew's share price to an all-time-high of 739 pence, but it fell after Friday's denial by the company.

Smith & Nephew has been the subject of persistent takeover speculation for years, with U.S. rivals in the market for replacement hips and knees like Biomet, Medtronic, Inc. (MDT) and Zimmer Holdings Inc. (ZMH) frequently touted as possible suitors.

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