Orthopedic device maker Zimmer is buying privately-held Biomet for about $13.35 billion in a move aimed at helping expand its product offerings and services.
Even though it is the buyer, Zimmer shares rose more than 17 percent in morning trading Thursday. Shares of companies that make an acquisition often fall when they announce a deal because of the costs. A rise suggests some investors like the deal.
Zimmer Inc. will pay $10.35 billion in cash and issue shares of its common stock valued at $3 billion to Biomet Inc.’s equity holders. The companies said that the deal’s total value also includes the assumption of an unspecified amount of debt.
“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,” Zimmer President and CEO David Dvorak said in a statement.
Biomet President and CEO Jeffrey Binder said that the deal will prepare Biomet “to compete as a stronger entity in the medical device industry in the future.”
Zimmer stockholders are expected to own about 84 percent of the combined company, with shareholders of Biomet targeted to own approximately 16 percent. The combined company will be based in Warsaw, Ind. and conduct business under a consolidated name.
Dvorak will serve as president and CEO of the combined company. Two of Biomet’s principal stockholders will serve on the combined company’s board.
Zimmer said the cash portion of the deal will be funded with existing cash on hand and proceeds from a newly committed $3 billion senior unsecured term loan and newly issued senior notes.
Zimmer Holdings Inc. anticipates annual savings of about $270 million by the third year after the transaction’s closing. Approximately $135 million in savings is foreseen in the first year.
The deal is expected to close in 2015’s first quarter.
Zimmer’s stock gained $15.68, or 17.1 percent, to $107.08 in morning trading. Its shares are up 41 percent over the past year.