Biomet Agrees to Increased $11.4 Billion Buyout Offer

Biomet Inc., the maker of orthopedic implants that put itself up for sale a year ago, agreed to a sweetened $11.4 billion buyout offer from private equity firms after a lower bid was criticized by one of the biggest shareholders and an advisory firm.

The new $46 a share offered by Blackstone Group LP, Kohlberg Kravis Roberts & Co., TPG, and the private-equity arm of Goldman Sachs Group Inc. is 4.5 percent higher than the group previously bid. Biomet, based in Warsaw, Indiana, said in a statement today that it canceled a vote set for tomorrow on the old bid.

The buying group will start a tender offer by June 14, Biomet said. The increased bid may close a dispute over the company’s value set off in December when Biomet accepted the equity group’s $10.9 billion proposal. Smith & Nephew Plc, Europe’s biggest maker of orthopedic devices, said Biomet rejected its higher bid, and Institutional Shareholder Services recommended that investors vote against the transaction.

“What’s going on is that Biomet is trying to respond to the market,” Jerry Yeager, an analyst with Warsaw-based SYM Financial Advisors, said in a telephone interview today. “My guess would be that their hope is this is enough to get the deal done.” Yeager said he doesn’t own any stock in the company.

Investor Peter Schoenfeld, the chief executive officer of P Schoenfeld Asset Management LLC in New York, said earlier this week the $44 offer was too low. He more than tripled his firm’s Biomet stake to 1.9 percent from 0.5 percent in March, he said June 5. Schoenfeld didn’t return a call today seeking comment.

Activist Pressure

Pressure from activist investors has resulted in higher bids for companies. Last year, billionaire investor Carl Icahn forced Time Warner Inc. to break up the company, which resulted in a $20 billion share buyback.

Laureate Education Inc. received a better offer after BlackRock Inc. and other shareholders said they felt the initial bid was unfair. Other companies, like OSI Restaurant Inc., Clear Channel Communications Inc., and Eagle Supply Group Inc. have faced similar shareholder pressure in their attempts to sell.

`Lower End of Acceptability’

The earlier offer for Biomet of $44 a share was “at the lower end of acceptability,” said analyst Michael Matson in a May 30 note to investors.

While ISS will issue a statement about the details of the plan, it doesn’t make vote recommendations on tender offers, spokeswoman Sarah Cohn said. Earlier this week, the investor advisory service said the $44-a-share bid didn’t reflect gains this year in implants. Hip and knee implant orders accelerated in the first quarter for Biomet and its four main competitors: Stryker Corp., Johnson & Johnson’s DePuy unit, Zimmer Holdings and Smith & Nephew Plc. Smith & Nephew had no comment.

Shares of Biomet rose $1.36, or 3.1 percent, to $45.56 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The stock held at less than $44 until this week.

“At least in my preliminary discussions with institutional shareholders, they appeared to be pretty happy” about the new deal, said Greg W. Sasso, a Biomet spokesman.

“By and large, the investment world loves the orthopedic world because of demographics: the baby boomers are aging, and we’re living longer,” said Yeager. “From a demographic standpoint that bodes well.”

The U.S. Department of Justice subpoenaed Biomet in June 2006 in an antitrust investigation, which is still under way, Yeager said.

“That put an artificial ceiling on the stock,” he said. “There are some disgruntled shareholders.”

Shareholders will receive information on the bid in the next five days giving them the option of tendering their shares, Sasso said.

Morgan Stanley advised Biomet’s board that the new bid is fair to shareholders, the company said in the statement today. Biomet said completion of the buyout is subject to the tendering of at least 75 percent of the company’s shares, matching the percentage approval requirement under the previous agreement.

If sufficient shares are tendered, the company will schedule another meeting, Sasso said.

SOURCE: BLOOMBERG.COM