Zimmer to combine with Biomet

Issue: May 2014

Zimmer Holdings Inc. and Biomet Inc.’s parent company announced today that the boards of directors for both companies have approved a definitive agreement for Zimmer to purchase Biomet in a cash and stock transaction. Valued at approximately $13.35 billion, the transaction, which will include the assumption of net debt and is subject to both customary closing conditions and regulatory approvals, is expected to be finalized in the first quarter of 2015.

The combined company, which will continue to be headquartered in Warsaw, Ind., is expected to deliver a more comprehensive portfolio of solutions with enhanced cross-selling opportunities as well as additional benefits to both health care stakeholders and stockholders. Following the transaction’s completion, David Dvorak, president and chief executive officer of Zimmer, will become president and chief executive officer of the combined company while two representatives of Biomet's principal stockholders will join the combined company’s board, which will be expanded accordingly.

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“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 health care providers, their patients and stockholders,” Dvorak stated in a company press 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…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.”

Zimmer will pay $10.35 billion in cash and will issue Biomet’s equity holders aggregate shares of Zimmer common stock valued at $3 billion. The cash portion will be funded by existing cash on hand as well as proceeds obtained from a newly committed $3 billion senior unsecured term loan and newly issued senior notes. Zimmer expects to refinance certain of its debt as part of the transaction, including its existing $250 million notes due 2014 and bank debt outstanding, as well as certain Biomet debt.

The combined company expects to maintain Zimmer’s investment grade credit ratings. Upon closing of the transaction, Zimmer stockholders are expected to own approximately 84% of the combined company, and Biomet shareholders are expected to own approximately 16%.

“This combination is about achieving growth and cultivating best-in-class solutions. We have a great deal of respect for what the management team and employees have accomplished at Biomet, and we are confident in their ability to be an important part of the combined organization as we bring our two world-class companies together and cement Warsaw, Ind. as the musculoskeletal innovation capital of the world…we look forward to combining the strengths of both teams to restore mobility, alleviate pain and improve the quality of life for patients around the world,” Dvorak stated in the release.

In the press release, Jeffrey R. Binder, Biomet’s president and chief executive officer, stated, “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. Biomet and Zimmer are blessed with talented team members and independent sales people who are dedicated to their companies and to their customers. With today’s announcement we are now additionally committed to blending and maximizing the best of our combined talents, capabilities, technologies and cultures to bring to life a great new company.”

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