Biotech Values

[DewDiligence]

Musings on the ZMH-Biomet merger:

http://online.wsj.com/news/articles/SB10001424052702303834304579521273613231670

Zimmer Holdings Inc. agreed to buy fellow orthopedic device maker Biomet Inc. for about $13.35 billion in cash and stock, in a bid to position the combined company as a leader in making products to repair muscles and bones.

The deal, which has been approved by the boards of both companies, would end Biomet's move to return to the public market. The maker of dental implants and artificial hips and knees earlier this year filed plans for an initial public offering, partly to pay off debt from its 2007 buyout.

The acquisition price, which includes the assumption of debt, consists of $10.35 billion in cash and $3 billion in Zimmer shares. Biomet had $5.83 billion in debt as of Feb. 28. [I.e. ZMH is valuing Biomet at approximately $19B after taking into account the assumption of debt.]

…The deal moves Zimmer more firmly into the top position in the global hip and knee market [behind #1 SYK]…while placing it second in the overall orthopedic market, behind Johnson & Johnson.

…Biomet was acquired in 2007 for about $11.3 billion by Blackstone Group, KKR & Co., TPG and Goldman Sachs Group Inc. 's buyout arm.

ZMH, which reported 1Q14 earnings today, set an all-time intra-day high and closed +12%.

Biomet’s decision to sell out rather than IPO was presumably based, in part, on the recent narrowing the biotech IPO window.