Biomet Seeking $1 Billion in IPO?

According to the Wall Street Journal, Biomet, Inc. is in talks with bankers about an initial public offering (IPO).

The Journal reported on February 12, 2014 that the company is in discussion with banks about returning to public ownership after being taken private for $11.3 billion in 2007 by four Wall Street buyout firms. The buyout came after company founder, Dane Miller, Ph.D. was removed as the company CEO. He returned with the bankers to retake the public company by buying out the public shareholders. According to securities filings, $5.9 billion of debt still remains on the company’s balance sheet.

According to the Journal, investors have been fond of new listings from private-equity backed companies that use IPO proceeds to pay down debt. By reducing their debt, such companies can quickly show improved profitability even without sales increasing.

Kohlberg Kravis Roberts (KKR), one of the Wall Street firms that reportedly put in around $1.3 billion to the private deal had its investment in Biomet marked at $.80 on the dollar as of September 30, 2013, the last time the firm gave detailed information on its investment.

For the last reported quarter, Biomet swung to a profit from a loss a year earlier as it posted a 6.6% rise in knee sales and a 2.3% rise in hip sales.

According to “people” familiar with the plans, the Journal says Biomet plans to interview bankers around the end of the month “with the aim of selecting underwriters for an initial public offering that could raise around $1 billion.” It is unclear how much the company might be worth, but it is likely to be several billions. No banks have yet been hired, the “people” said.

This isn’t the first time there have been rumors of Biomet’s pending return as public company or the value of the company.

Last June, the Financial Times of London reported that the company’s Wall Street owners were contemplating relisting the company and speculated on the possible worth of the company after rumors of a marriage between Biomet and Smith and Nephew failed to materialize.

At the end of May 2007, Biomet’s revenue was $2.1 billion. At the end of February 2013, revenue reached about $3 billion. Debt dropped from $6.3 billion in 2007 to approximately $5.9 billion today. EBITDA (earnings before interest, taxes, depreciation and amortization) had climbed to $946 million from $587 million in 2007, according to the Times report.

One of Biomet’s competitors, Stryker Corporation, was valued at about 8.5 times EBITDA, which would give Biomet a theoretical valuation of $8 billion, including debt. If KKR figures it has taken a 20% hit on its balance sheet, the company would be worth about $9.1 billion, including debt, according to the Times.