Zimmer in $13bn deal for rival Biomet

Zimmer, the maker of the eponymous walking frame, has agreed to acquire Biomet for $13.35 billion, combining the two ­providers of medical products in a cash-and-stock transaction that suggests the dealmaking frenzy in pharmaceuticals is spreading more broadly in healthcare.

The deal, which has been approved by the boards of both companies, will provide a successful exit for Biomet’s private equity owners.

Deals
The US company was bought for $11.3 billion by Goldman Sachs's buyout group, Blackstone, Kohlberg Kravis Roberts and TPG Capital in 2007.

The past week has been dominated by a spate of pharma deals. Valeant and the activist investor Bill Ackman teamed up to launch a $45 billion unsolicited bid for Allergan, the maker of Botox, while GlaxoSmithKline and Novartis agreed a $20 billion asset swap deal. There have also been leaks of since abandoned talks between Pfizer and AstraZeneca over a possible $100 billion takeover.

Demand
Zimmer and Biomet are both based in the town of Warsaw, Indiana, and make products that are expected to see increased demand as populations age across the developed world.

The deal would create by far the biggest maker of hip and knee implants and accelerate consolidation in the medical technology sector, which faces the same pressure as big pharma to increase competitiveness as governments and healthcare providers try to push down prices. Shares in Smith & Nephew, a rival UK-listed medical equipment maker, rose more than 3 per cent in anticipation of more deals. Others in the sector include Johnson & Johnson and Stryker of the US.

Under the terms of the latest deal, Biomet shareholders will receive $10.35 billion in cash and Zimmer stock worth $3 billion.
- Copyright The Financial Times Limited 2014