UPDATE 4-Zimmer to buy Biomet for $13.35 bln in latest consolidation

Thu Apr 24, 2014 1:40pm EDT
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(Adds private equity profit, comment, updates shares)

By Bill Berkrot and Esha Dey

April 24 (Reuters) - Zimmer Holdings Inc said on Thursday it would buy rival orthopedic products maker Biomet Inc for more than $13 billion, the latest deal in a wave of consolidations in the healthcare industry.

Investors gave a resounding thumbs up to the announcement, sending Zimmer shares up more than 18 percent on expectations the larger scale will help it navigate stiffer pricing pressure on medical devices from hospitals and insurers. The deal is expected to take Zimmer from the fourth-largest seller of orthopedics products to No. 2, behind Johnson & Johnson.

Zimmer, which expects to close the deal in the first quarter of 2015, said the combination would double the size of its spine and dental business, broaden its portfolio of products to treat bones, knees and hips, and give it an entry into the smaller but growing field of sports medicine.

"Biomet is a perfect fit for us," Zimmer Chief Executive David Dvorak told analysts and investors on a conference call.

The deal will also significantly add to Zimmer's earnings in the first year and lead to net annual cost savings of about $270 million by the third year after closing, the company said.

"The financial aspects of it are hard to find fault in," said Jefferies & Co analysts Raj Denhoy. "In healthcare, being a larger company that has a broader product offering seems to be the way that things are evolving. You're selling to hospitals as opposed to individual surgeons and having that larger footprint is believed over time to be important."

The Zimmer announcement follows a flurry of large deals and rumored transactions in healthcare aimed at either gaining scale or specializing in certain disease areas over the past few days.   Continued...