ZimVie
(Nasdaq: ZIMV)
announced today that it agreed to sell its spine business to investment firm H.I.G. Capital.
Shares of ZIMV skyrocketed more than 50% to $17.05 apiece by the afternoon. MassDevice‘s MedTech 100 Index was up slightly.
The sale of the business, valued at $375 million, establishes ZimVie as a pure-play dental company. Westminster, Colorado-based ZimVie spun out of Zimmer Biomet nearly two years ago as a combination of the orthopedic giant’s spine and dental units.
Under the terms of the agreement, ZimVie will receive $375 million in total consideration, including $315 million in cash. The remaining $60 million comes in the form of a promissory note that accrues interest at a rate of 10% per annum. ZimVie’s board of directors approved the transaction and expects it to close in the first half of 2024.
The company plans to use after-tax proceeds to reduce debt, while it projects an accretive impact on revenue growth, EBITDA margin and cash flow. ZimVie said the deal allows it to streamline operations and sharpen its focus as a pure-play dental company.
President and CEO Vafa Jamali said in a news release that the sale includes the company’s core spine, motion preservation and EBI bone healing portfolio and services.
“Our spine business possesses an innovative portfolio, and is well-positioned to continue to improve under this new ownership. Similarly, this transaction provides the capital to fund go-forward growth for dental’s commercial and innovation platforms while reducing ZimVie’s leverage profile,” Jamali said. “This transaction is intended to create a leaner, more focused ZimVie with a leading position in attractive and growing global dental markets.”
In a statement shared by a spokesperson with MassDevice, ZimVie said H.I.G. Capital intends to support the existing management of the spine organization. ZimVie Global Spine President Rebecca Whitney will continue as the president of Spine in the new company, reporting to a CEO to be named later.
Recent developments for ZimVie’s spine business
ZimVie just last week announced a major regulatory development for its spine business. The FDA cleared the use of its Vital spinal fixation system with Brainlab’s Spine & Trauma Navigation.
Other recent developments included the first U.S. procedures with its new 4.5 mm Mobi-C cervical disc in October. ZimVie also hit a major milestone with its Tether system in October, treating the 2,000th child with the system.
Whitney, ZimVie’s top spine tech executive, spoke about the system’s development and commercialization last year at DeviceTalks Boston.
Whitney also recently spoke to Medical Design & Outsourcing about the spine business’ current position. Since the company spun out of Zimmer Biomet, Whitney and its leadership looked to cut down the spine business. It even exited markets like China in March.
David Saxon, senior research analyst at Needham & Co., recently described the spine business as a “pain in the back” for ZimVie. He highlighted more solid footing for the dental business as well.
In a note out today, Saxon described the spine business sale as a step in the right direction.
Whitney told MDO that ZimVie plans a refresh of its core spinal fusion line as well.
“Part of what we’re doing is not starting over and wiping away everything that we spun out with, but starting from a huge head start to make those products even better,” she said.
Mike Gallagher, managing director at H.I.G. Capital, believes the business has a solid foundation. He highlighted its market-leading portfolio, surgeon satisfaction and patient outcomes.
“We see a tremendous opportunity to partner with the spine leadership team to support best-in-class innovation and robust commercial execution,” Gallagher said. “The combination of H.I.G.’s expertise in the medical device space and the capabilities of ZimVie spine management will create an innovation engine for distributors, surgeons and patients.”
Executive Editor Chris Newmarker contributed to this report.
