Biomet Bribery Charges Overshadow Rumors of EU Zimmer Acquisition Approval

Unnamed sources say European antitrust regulators have decided to give conditional approval to Zimmer Holdings, Inc.’s proposed $13.4 billion takeover of Biomet, Inc.

Reuters reported on March 18, 2015 that two people, “with knowledge of the matter, ” informed the news organization of the pending approval. Zimmer sweetened its concessions to the Europeans in December by proposing to sell one unicompartmental knee brand and one elbow brand in Europe, as well as one total knee brand in two European countries.

Biomet Employees Disciplined

On that day of good news for the companies, Zimmer filed a report with the U.S. Securities Exchange Commission (SEC) stating that Biomet has “terminated, suspended or otherwise disciplined certain employees, ” involved in alleged improprieties [bribes] in Brazil and Mexico. The allegations include “improprieties” that predate a March 26, 2012, Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice for possible violations of the Foreign Corrupt Practices Act (FCPA).

The government agreed to defer prosecuting Biomet if the company paid a $17 million fine, promised to sin no more and appoint an independent external compliance monitor. The government also retained the right to extend the DPA an extra year.

As previously reported, in October 2013 Biomet disclosed that the company became aware of “alleged improprieties” in Brazil and Mexico and investigated the matter. Based on that investigation, the company took the disciplinary actions against the unnamed employees. The government also issued a subpoena on July 2, 2014 to Biomet requiring the company to turn over documents from their investigation.

Government Extends DPA

On March 13, 2015, the government decided to extend the company’s DPA and independent compliance monitor for an additional year.

Zimmer’s SEC filing says Biomet continues to cooperate with the government and expects that discussions will continue. The filing did not address whether anything related to the Biomet investigation would impact regulatory approval of the merger. Biomet disclosed all this to Zimmer officials before the offer to acquire the company was made. Nothing we’ve read leads us to think the investigation will impact the merger.