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Last updated: April 24, 2014 7:11 pm
Zimmer, the maker of the eponymous walking frame, has agreed to acquire Biomet for $13.35bn, combining the two providers of medical products in a cash-and-stock transaction that suggests the dealmaking frenzy in pharmaceuticals is spreading more broadly in healthcare.
The deal, which has been approved by the boards of both companies, will also provide a successful exit for Biomet’s private equity owners. The New Jersey-based company was bought for $11.3bn by Goldman Sachs’s buyout group, Blackstone, Kohlberg Kravis Roberts and TPG Capital in 2007.
The past week has been dominated by a spate of pharma deals. Valeant and the activist investor Bill Ackman teamed up to launch a $45bn unsolicited bid for Allergan, the maker of Botox, while GlaxoSmithKline and Novartis agreed a $20bn asset swap deal. There have also been leaks of talks – since abandoned – between Pfizer and AstraZeneca over a possible $100bn takeover.
Zimmer and Biomet are both based in the town of Warsaw, Indiana, and make products that are expected to see increased demand as populations age across the developed world.
The deal would create by far the biggest maker of hip and knee implants and accelerate consolidation in the medical technology sector, which faces the same pressure as big pharma to increase competitiveness as governments and healthcare providers try to ratchet down prices.
Under the terms of the latest deal, Biomet shareholders will receive $10.35bn in cash and Zimmer stock worth $3bn. Zimmer shareholders will own 84 per cent of the combined company, with Biomet shareholders owning 16 per cent.
David Dvorak, Zimmer’s chief executive, said: “This is a milestone combination that brings together two highly complementary organisations and is consistent with our mission to lead the industry in delivering value to healthcare providers, their patients and stockholders.”
Medical device merger makes sense in context of an ageing industry
The value of healthcare deals is already at more than $150bn globally for the year to date, according to data from Dealogic. The surge has helped push the overall M&A market above the $1tn mark – the first time since 2007 that it has been reached at this point in the year.
The bulk of the activity has been in the cash-rich pharmaceuticals sector, accounting for 13 per cent of total global M&A activity so far this year – behind only telecoms, media and technology.
Other deals in the medical devices sector have included Smith & Nephew’s $1.7bn takeover of Texas-based AthroCare, agreed in February.
Shares in Zimmer rose 15.3 per cent in early New York trading to $105.48.
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