Zimmer Gives Europeans More Time for Zimmer/Biomet Deal

The European Commission was supposed to make a decision on the ZimmerBiomet deal by March 11, 2015.

On November 18, 2014, Zimmer Holdings Inc. announced the company had agreed to extend the European deadline by a “limited number of days, ” and provide the European regulators with additional information.

In October, the Commission opened an “in-depth investigation” into the planned $13.35 billion merger with Biomet, Inc. The Commission said the deal could result in less innovation and higher prices.

Company officials continue to tell analysts that they expect the deal to go through in the first quarter of 2015.

“Deadline extensions are not uncommon in such in-depth investigations. Zimmer has been working closely with the regulatory authorities to facilitate their review of the pending transaction and is encouraged by the substantial progress that has been made to date in connection with the overall regulatory process. Zimmer continues to expect to close the transaction in the first quarter of 2015, ” stated the November 18 Zimmer announcement.

Unicompartmental Knees and Shoulder Divestitures?

When the Europeans announced their investigation in October, Wells Fargo analyst, Larry Biegelsen said that, according to his consultant, the review is still likely to be resolved through divestitures. The likely areas of divestiture, according to Biegelsen, are unicompartmental knees and shoulders, given the high combined market share.

Biegelsen pointed out that the EU antitrust regulators also launched an in-depth investigation into the Johnson & Johnson/Synthes merger on November 3, 2011, and that deal was cleared on April 19, 2012 after Johnson & Johnson agreed to divest its trauma business to Biomet.

The U.S. government has yet to approve the deal. The Federal Trade Commission (FTC) requested additional information in July. The transaction remains subject to the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, approval from the Japan Fair Trade Commission, as well as other customary closing conditions.

BofA Merrill Lynch analyst, Bob Hopkins said back in October that regarding the U.S. timelines, “based on past experience, generally if things go well, ” a second request may only take three months to turn, but that four to five months is more the norm.

“The possibility remains that the FTC could comment soon, but our conversations with FTC experts suggest FTC and EU regulators will likely coordinate the investigation to the extent permissible in order to reach agreement on any potential conditions placed on the deal. Coordination between the U.S. and EU could potentially push out the FTC ruling into early next year, ” writes Hopkins.

Both analysts believe the deal is still on track.