The health care industry continued to dominate the M&A market Thursday with the announcement that Zimmer Holdings has agreed to acquire rival medical device specialist Biomet Inc. in a cash-and-stock deal worth $13.35 billion.
The transaction is the latest in a spate of high-profile deals announced this week involving companies in the health care and pharmaceutical industries.
As The Am Law Daily has previously reported, Canada’s Valeant Pharmaceuticals International on Tuesday launched a $45.7 billion hostile bid for Botox maker Allergan, which, in turn, adopted a one-year shareholder rights plan, or “poison pill,” aimed at staving off any unwanted takeover attempts. Swiss pharmaceutical giant Novartis also unveiled a major restructuring this week involving a series of multibillion-dollar transactions with rivals GlaxoSmithKline and Eli Lilly.
Zimmer and Biomet—both of which are based in Warsaw, Indiana, the home of several medical device manufacturers—specialize in orthopedic surgical devices such as artificial hips and knees. Together, the companies—which also make a range of other surgical and dental products—generated $7.8 billion in revenue last year. Zimmer said it expects the combined company to see roughly $270 million in annual savings within three years of the transaction’s closing.
In announcing the deal, Zimmer said it will bolster the company’s portfolio of products while improving its position in what it estimates to be a $45 billion musculoskeletal industry. Once completed, the acquisition would put Zimmer just behind Johnson & Johnson in that market, according to Bloomberg.
Under the terms of the deal, Zimmer will pay Biomet shareholders $10.35 billion in cash as well as Zimmer stock worth $3 billion. The total purchase price includes the assumption of Biomet debt, which The Wall Street Journal pegged at $5.83 billion, as of late February. Once the deal closes—which is expected during the first quarter of 2015, pending regulatory approval—Biomet shareholders will own about 16 percent of the combined company.
The sale comes a month after Biomet filed for an initial public offering expected to raise $100 million. That move was designed to erase some of the debt Biomet’s private equity owners incurred buying the company in a $11.4 billion take-private deal in 2007. The buyers included Goldman Sachs’ private equity arm, The Blackstone Group, KKR and TPG Capital.
White & Case is advising Zimmer on the acquisition of Biomet with a team led by New York–based M&A partner Morton Pierce and his fellow M&A partners Chang-Do Gong and Robert Chung. All three partners joined White & Case from now-defunct Dewey & LeBoeuf, leaving the latter amid its 2012 collapse. According to bios of Pierce and Gong posted on the White & Case website, both lawyers worked on Zimmer’s $3 billion purchase of Swiss orthopedics company Centerpulse in 2003 while they were with Dewey predecessor firm Dewey Ballantine.
Chad Phipps serves as Zimmer’s general counsel.
Cleary Gottlieb Steen & Hamilton is acting as lead counsel to Biomet on the transaction. The firm also advised Biomet in 2012 in connection with its acquisition of Johnson & Johnson’s global trauma business, DePuy Orthopaedics, for $280 million. Johnson & Johnson sold the unit in order to secure antitrust approval for its $21.3 billion purchase of orthopedic devices manufacturer Synthes.
The Cleary team working on the deal announced Thursday is led by New York–based M&A partner Robert Davis as well as corporate partner Jeffrey Karpf and corporate counsel Helena Grannis. Employment law partner Arthur Kohn, finance partner Margaret “Meme” Peponis and employment law counsel Mary Alcock are also advising on the deal, while Brussels-based partner F. Enrique González-Díaz is leading a Cleary team advising Biomet on European antitrust aspects of the transaction.
The Cleary associates working on the matter are Daniel Fernandez, Paul Gilbert, Dorje Glassman, Ian Hastings, Ben Holles de Peyer, James Langston, Christopher Oglesby, Virginia Romero, Marc Rotter and Amber Thiel.
Weil, Gotshal & Manges is serving as Biomet’s U.S. antitrust counsel with a team that includes global antitrust head Steven Newborn along with Washington, D.C.–based antitrust partners Ann Malester and Steven Bernstein as well as antitrust counsel Vadim Brusser and associate Megan Peloquin.
Ropes & Gray, meanwhile, is serving as Biomet’s regulatory counsel. The Ropes team is led by private equity transactions partner Neill Jakobe, litigation partners Asheesh Goel and Laura Hoey, life sciences partners Michael Beauvais and Joy Liu, IP litigation partner Marc Cavan and health care counsel Allison Fethke. Ropes associates on the deal are Nicholas Berg, Jenna Gillingham, Evan Moll and Arefa Shakeel.
Bradley Tandy is Biomet’s general counsel.