Health and Healthcare

Why the Zimmer Biomet and LDR Deal Is a Big Win

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Shares of LDR Holding Corp. (NASDAQ: LDRH) skyrocketed in Tuesday’s session following the definitive agreement for Zimmer Biomet Holdings Inc. (NYSE: ZBH) to acquire the company. Both boards of directors have agreed, and Zimmer Biomet will commence a tender offer to acquire all outstanding shares of LDR for $37 per share in cash.

Overall, the entire transaction is valued up to roughly $1 billion. The deal is expected to close in the third quarter of 2016, but it is still subject to customary closing conditions. Goldman Sachs and Merrill Lynch are acting as financial advisors to Zimmer Biomet and LDR, respectively.

In order to fund the offering, the Zimmer Biomet board plans to issue $750 million in senior unsecured notes, which will be used to repay the credit facility following the transaction. Zimmer Biomet has a market cap of nearly $24 billion.

Zimmer Biomet expects to bolster its presence in the global Spine market with the addition of LDR, as well as providing the company with an immediate and a leading position in the fast growing cervical disc replacement (CDR) and minimally invasive surgery (MIS) segments. The combination is expected to meaningfully accelerate the growth of Zimmer Biomet’s spine business through the incremental revenues associated with entry into the CDR market and cross-portfolio selling opportunities to both Zimmer Biomet and LDR customer bases.

Keep in mind that CDR represents the fastest growing segment in the Spine industry, which is valued up to $10 billion.

David Dvorak, president and CEO of Zimmer Biomet, commented:

This highly strategic and complementary transaction will enhance Zimmer Biomet’s innovation leadership in musculoskeletal healthcare by adding a premier spine platform to our portfolio of solutions. This combination is consistent with our goal of driving meaningful growth across all musculoskeletal markets with innovative products, technologies and services that enhance patient outcomes.  The talented LDR team uniquely shares our deeply held commitment to innovating in a manner that restores mobility and alleviates pain for patients around the world, and we look forward to welcoming them to Zimmer Biomet.  We are confident that the combination of Zimmer Biomet’s Spine division and LDR will create a Spine company with the scale, talent and technology portfolio to become a leader in the $10 billion global Spine market.

LDR shares were trading up over 60% at $36.94 on Tuesday, with a consensus analyst price target of $34.00 and a 52-week trading range of $16.33 to $47.12.

Shares of Zimmer Biomet were down 2.3% at $118.74. The consensus price target is $126.48, and the 52-week range of $88.27 to $123.43.

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