Smith & Nephew (S&N), the medical devices group, says that it will sue the sellers of Plus, the orthopaedics business it bought last year for $899 million (£468 million), after finding what it describes as “unacceptable sales practices” within it.

S&N is seeking an undisclosed sum in damages from Plus's four former owners after discovering the sales practices in Plus's subsidiaries in Greece and several other countries.

S&N admitted in May that it would suffer a $100 million loss in sales this year because of the cost of cutting out the practices. On the day that S&N disclosed the investigation, its shares closed down almost 13 per cent.

The group has not elaborated on how the sales practices were unacceptable to it, although David Illingworth, chief executive, told The Times that the matter did not involve surgeons receiving rewards from the company for using its devices.

Plus's vendors were Robert Riedweg, its former chief executive, Ulrich Sigg, its former chairman, and Hyos Invest Holding and Active Investor, two Swiss-based investment funds.

A spokesman for Plus's sellers said that a letter from S&N claiming breach of contract “doesn't contain any substantiated facts or figures and legal action has not been instigated”.

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