A consortium of private equity groups on Monday swooped in ahead of Britain’s Smith & Nephew to acquire Biomet, the US orthopaedic devices manufacturer, for $10.9bn.
The deal extends the reach of private investment firms into the global healthcare industry, where they will now own one of the world’s largest makers of artificial hips, knees and dental implants.
Emerging with the winning bid for Biomet was a group of firms comprising Blackstone, Goldman Sachs, Kohlberg Kravis Roberts, and Texas Pacific Group, which agreed to pay $44 per share for the company.
This represents only a small premium over Biomet’s market value on Friday, and the company’s shares fell 1.57 per cent to $41.34 as investors reacted to the purchase price with disappointment.
Although private equity groups have long invested in the healthcare industry, they are now doing so on a much larger scale in a sector that could expose them to a high level of scrutiny and political risk.
In late July, KKR teamed up with Bain Capital and Merrill Lynch to buy HCA, the largest US hospitals chain, for $33bn including debt, in one of the largest leveraged buy-outs ever.
Under private ownership, Biomet will face intense competition from a number of larger rivals, vying in the $22bn global orthopaedic implant market and growing as baby boomers retire and wish to remain active.
Based in Indiana, Biomet put itself up for sale in April, but struggled to find a buyer for several months. On Monday,the company also said it would delay its next set of results as it reviews stock options practices for the past decade.
Morgan Stanley advised Biomet, which received legal advice from Kirkland & Ellis and Simpson Thacher. Bank of America and Goldman Sachs advised the consortium and financed the deal. Cleary Gottlieb lawyers also advised the buy-out groups.
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