Stryker Corp. is planning a takeover offer for U.K. medical device maker Smith & Nephew plc people familiar with the matter said.

The transaction could could happen in the coming weeks. Smith & Nephew rose in London trading after reports surfaced.

Stryker, a U.S. producer of surgical implants, plans to offer a significant premium to Smith & Nephew’s share price, with one of the people saying it could be about 30 percent. Smith & Nephew gained as much as 9.2 percent and was up 9.1 percent at 8:16 a.m. That takes the gain this year to 38 percent and values the company at about 10.6 billion pounds ($16.5 billion).

Stryker, based in Kalamazoo, Michigan, is not planning a tax inversion because of the limited tax benefits and political risk, said one of the people, who asked not to be identified because deliberations are private. The U.S. government is clamping down on those types of deals to stop companies from moving their addresses abroad to cut taxes.

The bid is still being finalized and the timing could change, said the people. There’s also a chance that Stryker may decide against an offer, one of the people said.

Representatives for Stryker and Smith & Nephew declined to comment. Stryker rose 1.7 percent to $96.61 at the close in New York yesterday, giving the company a market value of about $37 billion.

Medical-device companies are looking to consolidate as hospitals and insurers demand better prices from suppliers to tame rising costs. (For more coverage, see 5 Technologies Drive Health Care M&A.)

Two large manufacturers of surgical products and medical supplies, Medtronic Inc. and Covidien plc, are in the process of completing a merger that was announced in June. (See the video below with former Sen. Scott Brown discussing Medtronic’s purchase of Covidien and how it highlights the role taxes play in medical device consolidation.)

A Stryker purchase of Smith & Nephew may be much more positive for earnings if it isn’t structured as an inversion, Morgan Stanley analysts said late yesterday. A deal could be done with cash funded entirely by debt, or may be a cash and equity transaction with an estimated 85 percent in debt and 15 percent in shares, Morgan Stanley said.

Last month, Stryker was discussing the financing of a deal and potential antitrust hurdles with advisers, people familiar with the matter said at the time.

For more, see 10 Issues Medical Device Buyers Should Consider and GI Partners Adds to Health Care Tech M&A with Logibec.