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Zimmer buying Biomet in $13 billion deal

By: Gayle S. Putrich

April 24, 2014

Orthopedic device giant Zimmer Holdings Inc. is buying rival Biomet Inc. in a $13.35 billion cash and stock deal, the companies announced April 24.

The deal between the pair of Warsaw, Ind.-based orthopedic, surgical and dental medical device providers is expected to be finalized in the first quarter of 2015, pending regulatory approval.

“Biomet is a perfect fit for us,” Zimmer President and CEO David Dvorak told analysts and investors on a Thursday conference call.

The combination of the two companies is expected to double the size Zimmer’s spine and dental business, broaden its portfolio of products to treat bones, knees and hips and provide the brand with an entree into sports medicine and the fast-growing trauma market.

“We believe that current demographic and macroeconomic trends affecting the health care industry will reward companies that successfully partner with other key stakeholders to improve patient care in a cost-effective manner,” Dvorak said. “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.”

In 2007, Biomet was acquired for $11.3 billion by private equity groups Blackstone, Goldman Sachs’s buyout division, along with Kohleberg Kravis Roberts and TPG Capital.  The private equity consortium just last month floated a $100 billion initial public offering plan to take Biomet public again, but that is being scrapped in favor of the Zimmer deal. Under the new deal, Zimmer will pay Biomet shareholders $10.35 billion in cash and stock worth $3 billion. Zimmer shareholders will own 84 percent of the combined company, with Biomet shareholders owning 16 percent.

“Biomet and Zimmer share a 36-year history of mutual respect,” said Biomet President and CEO Jeffrey R. Binder, in a press release. “The combination with Zimmer will prepare us to compete as a stronger entity in the medical device industry of the future.  Our combined scale will extend the reach and influence with which we pursue our common passion:  delivering products and services that benefit our customers and the patients we ultimately serve.”

According to a Zimmer press release, the two companies had a combined 2013 revenue of $7.8 billion and Zimmer expects to see a cost savings of about $270 million by the third year after the deal is done, with approximately $135 million anticipated in the first year. 

Also on Thursday, Zimmer reported net sales of $1.6 billion and net earnings of $221 million for the first quarter of 2014.