This week was quite busy for health care and pharmaceutical deals; news broke of Novartis (NYSE: NVS) and GlaxoSmithKline’s (NYSE: GSK) $20 billion deal and Valeant (NYSE: VRX) with over a $45 billion hostile bid to overtake Allergan (NYSE: AGN).
Zimmer Holdings (NYSE: ZMH) and Biomet are now the newest names in pharmaceutical news, as Zimmer Holdings will be buying Biomet in a cash-and-stock deal for $13.35 billion. This deal will bring together two providers of orthopedic, surgical, and dental goods and the combined company will now be the second largest in the market for treating muscle and orthopedic injuries.
Zimmer will pay Biomet shareholders $10.35 billion in cash and stock worth $3 billion. Zimmer shareholders will own the majority of the combined company, 84%, while Biomet shareholders will own 16%. The purchase will end a planned IPO on Biomet’s part; the offering announced last month was intended to raise just around $100 million to pay off the debt that Biomet’s owners were subjected to, including Blackstone Group (NYSE: BX) and Goldman Sachs (NYSE: GS) when the company went private in 2007.
Zimmer and Biomet expect to generate cost savings of $135 million in their first year as a combined company and $270 million by their third year. The savings will present $1.15 to $1.25 a share in earnings during their first year. Just after the companies made an announcement, Zimmer’s shares rose 16% today. This is expected to be a good deal on both companies’ parts and will bring them exposure in areas that Zimmer was not relevant in before, like sports medicine and trauma.