04.24.14
The circle of billion-dollar orthopedic device businesses just got a little smaller.
On the morning of April 24, Zimmer Holdings Inc. announced plans that it would buy rival Biomet Inc.’s in a deal worth $13.35 billion.
Biomet was taken private for $11.4 billion in 2007 by a private equity consortium including affiliates of Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co and TPG.
Both boards of directors have approved a definitive agreement. Zimmer will acquire Biomet in a cash and stock transaction valued at approximately $13.35 billion, including the assumption of net debt. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close in the first quarter of 2015. Zimmer will pay $10.35 billion in cash and will also issue to Biomet’s equity holders an aggregate number of shares of Zimmer common stock valued at $3 billion. At closing, Zimmer stockholders are expected to own approximately 84 percent of the combined company, and Biomet shareholders are expected to own approximately 16 percent.
The merger of Zimmer and Biomet will position the combined company a force to be reckoned with in the $45 billion musculoskeletal industry. Upon closing, the transaction is expected to be double-digit accretive to Zimmer’s adjusted diluted earnings per share in the first year. Cash flows from operations are expected to increase by 1.5 times Zimmer’s standalone estimates.
The 2013 combined calendar year revenues of Zimmer and Biomet total approximately $7.8 billion. Zimmer also expects to achieve net annual synergies of approximately $270 million by the third year following the closing of the transaction, with approximately $135 million anticipated in the first year.
“This is a milestone combination that brings together two highly complementary organizations and is consistent with our mission to lead the industry in delivering value to healthcare providers, their patients and stockholders,” said David Dvorak, Zimmer's president and CEO. “The transaction positions the combined company as a leader in the musculoskeletal industry with a broad portfolio of products, technologies and services, enabling us to help shape how solutions are developed and delivered. We believe that current demographic and macroeconomic trends affecting the healthcare industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner. Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers. At the same time, we believe that this merger will further support our long-term growth and stockholder value creation strategies.”
Dvorak said the merger was about "achieving growth and cultivating best-in-class solutions," adding that Zimmer's management has "a great deal of respect" for what the management team and employees have accomplished at Biomet.
"We are confident in their ability to be a very important part of the combined organization as we bring our two world-class companies together and cement Warsaw, Indiana, as the musculoskeletal innovation capital of the world," he noted during a conference call with analysts and reporters, predicting a smooth transition in combining the companies, which are both based in Warsaw.
Jeffrey R. Binder, Biomet’s president and CEO, said: Biomet and Zimmer share a 36-year history of mutual respect. Both companies are deeply rooted in the communities in which we operate and believe that we can only be successful in business if we are successful in helping healthcare providers improve the lives of patients. We are equally committed to delivering quality products and outstanding clinical results and to legal and ethical behavior in the markets where we do business. And as companies focused almost exclusively in the musculoskeletal industry, we are passionate about orthopedics and the related medical technology markets that we serve.”
Binder added that the combined management team is "committed to blending and maximizing the best of our combined talents, capabilities, technologies and cultures to bring to life a great new company.”
According to Binder and Dvorak, the "complementary nature" of the two businesses adds diversity and scale across geographies and product categories.
Given the complementary nature of the portfolios, the combined company will offer a greater depth and breadth of musculoskeletal solutions to improve clinical outcomes and patient satisfaction levels, the executives predicted. The combination will enhance enterprise diversification with broader franchises in the knee, hip, surgical, spine and dental categories, as well as in the faster-growing sports medicine, extremities and trauma categories.
Zimmer and Biomet expect to leverage complementary sales channels in major markets to achieve cross-selling opportunities, while also strengthening their presence in emerging markets through the combination.
The combined company will continue to be headquartered in Warsaw and maintain regional offices around the world. Upon completion of the transaction, David Dvorak will be president and CEO of the combined company. Also after closing, two representatives of Biomet’s principal stockholders will join the combined company’s board, which will be expanded accordingly, officials noted. No word yet on positions for Biomet's C-suite.
As far as branding, the combined company will conduct business "under a consolidated name that will leverage the strengths of both brands," but precise details were not discussed.
Of course, as a result of the transaction, Biomet will withdraw the registration statement previously filed with the U.S. Securities and Exchange Commission in connection with its proposed initial public offering.
On the morning of April 24, Zimmer Holdings Inc. announced plans that it would buy rival Biomet Inc.’s in a deal worth $13.35 billion.
Biomet was taken private for $11.4 billion in 2007 by a private equity consortium including affiliates of Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co and TPG.
Both boards of directors have approved a definitive agreement. Zimmer will acquire Biomet in a cash and stock transaction valued at approximately $13.35 billion, including the assumption of net debt. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close in the first quarter of 2015. Zimmer will pay $10.35 billion in cash and will also issue to Biomet’s equity holders an aggregate number of shares of Zimmer common stock valued at $3 billion. At closing, Zimmer stockholders are expected to own approximately 84 percent of the combined company, and Biomet shareholders are expected to own approximately 16 percent.
The merger of Zimmer and Biomet will position the combined company a force to be reckoned with in the $45 billion musculoskeletal industry. Upon closing, the transaction is expected to be double-digit accretive to Zimmer’s adjusted diluted earnings per share in the first year. Cash flows from operations are expected to increase by 1.5 times Zimmer’s standalone estimates.
The 2013 combined calendar year revenues of Zimmer and Biomet total approximately $7.8 billion. Zimmer also expects to achieve net annual synergies of approximately $270 million by the third year following the closing of the transaction, with approximately $135 million anticipated in the first year.
“This is a milestone combination that brings together two highly complementary organizations and is consistent with our mission to lead the industry in delivering value to healthcare providers, their patients and stockholders,” said David Dvorak, Zimmer's president and CEO. “The transaction positions the combined company as a leader in the musculoskeletal industry with a broad portfolio of products, technologies and services, enabling us to help shape how solutions are developed and delivered. We believe that current demographic and macroeconomic trends affecting the healthcare industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner. Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers. At the same time, we believe that this merger will further support our long-term growth and stockholder value creation strategies.”
Dvorak said the merger was about "achieving growth and cultivating best-in-class solutions," adding that Zimmer's management has "a great deal of respect" for what the management team and employees have accomplished at Biomet.
"We are confident in their ability to be a very important part of the combined organization as we bring our two world-class companies together and cement Warsaw, Indiana, as the musculoskeletal innovation capital of the world," he noted during a conference call with analysts and reporters, predicting a smooth transition in combining the companies, which are both based in Warsaw.
Jeffrey R. Binder, Biomet’s president and CEO, said: Biomet and Zimmer share a 36-year history of mutual respect. Both companies are deeply rooted in the communities in which we operate and believe that we can only be successful in business if we are successful in helping healthcare providers improve the lives of patients. We are equally committed to delivering quality products and outstanding clinical results and to legal and ethical behavior in the markets where we do business. And as companies focused almost exclusively in the musculoskeletal industry, we are passionate about orthopedics and the related medical technology markets that we serve.”
Binder added that the combined management team is "committed to blending and maximizing the best of our combined talents, capabilities, technologies and cultures to bring to life a great new company.”
According to Binder and Dvorak, the "complementary nature" of the two businesses adds diversity and scale across geographies and product categories.
Given the complementary nature of the portfolios, the combined company will offer a greater depth and breadth of musculoskeletal solutions to improve clinical outcomes and patient satisfaction levels, the executives predicted. The combination will enhance enterprise diversification with broader franchises in the knee, hip, surgical, spine and dental categories, as well as in the faster-growing sports medicine, extremities and trauma categories.
Zimmer and Biomet expect to leverage complementary sales channels in major markets to achieve cross-selling opportunities, while also strengthening their presence in emerging markets through the combination.
The combined company will continue to be headquartered in Warsaw and maintain regional offices around the world. Upon completion of the transaction, David Dvorak will be president and CEO of the combined company. Also after closing, two representatives of Biomet’s principal stockholders will join the combined company’s board, which will be expanded accordingly, officials noted. No word yet on positions for Biomet's C-suite.
As far as branding, the combined company will conduct business "under a consolidated name that will leverage the strengths of both brands," but precise details were not discussed.
Of course, as a result of the transaction, Biomet will withdraw the registration statement previously filed with the U.S. Securities and Exchange Commission in connection with its proposed initial public offering.