The deal, a mix of stock and cash that is expected to close during Q1 2015, will create a company with annual sales of nearly $8 billion, putting Zimmer/Biomet just behind Johnson & Johnson (NYSE:JNJ) subsidiary Depuy Synthes and ahead of Stryker (NYSE:SYK) as the 2nd largest pure play orthopedic company in the world.
“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,” Zimmer President and CEO David Dvorak said in a prepared release. “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.”
Zimmer will pay $10.35 billion in cash and will also issue to Biomet’s shareholders Zimmer common stock valued at $3.0 billion. The companies will continue to be based in Warsaw, Ind. with Dvorak staying on as CEO after the deal closes. The combined companies will operate under a consolidated name.
In conjunction with the deal Biomet will withdraw a plan to put itself back on the public market after a 7-year run under private equity ownership.
A group of private PE players including the Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and TPG acquired Biomet for $11.4 billion in 2007, placing medtech veteran Jeffrey Binder at the helm.
Investors on Wall Street reacted positively to the news, sending shares of Zimmer up 15% to $105.20 in mid morning trading.
In a note to investors, Leerink Partners analyst Richard Newitter said investors were "itching for Zimmer to use its balance sheet and make a large strategic move."
Newitter added that the deal could portend more consolidation in the orthopedic world in the near future.