Zimmer Biomet Holdings (ZBH) will buy LDR Holding (LDRH) for approximately $1 billion to expand in the spine treatment device market. LDR Holding is a Texas-based company that was founded in France in 2000. It develops surgical technologies for the treatment of spine disorders. The Mobi-C CDR (cervical disc replacement) is the company’s biggest product. It’s used for the treatment of damaged cervical discs. The CDR product segment is estimated to be the fastest-growing segment of the spine business. Zimmer expects to add an innovative complementary product portfolio to its spine business and help advance its market position in the $10 billion global spine market.
Zimmer Biomet Holdings will acquire all the shares of LDR in a cash transaction of $37 per share, representing a premium of approximately 64% to the closing price of $22.6 on the date of the acquisition announcement. The company expects to close the deal in 3Q16, and LDR will form part of the company’s Spine and CMF business segment.
Market position and opportunities
The global spine market is estimated to be around $10 billion. Zimmer Biomet and LDR have market shares in the spine market of approximately 5% and 2%, respectively. The CDR and MIS (minimally invasive surgery) segments are the fastest-growing segments in this market. As per the company, LDR’s Mobi-C currently has around 30%–40% market share of the global CDR market. The acquisition of LDR will position Zimmer Biomet Holdings as a leading company in these segments. The cross-selling opportunities and new segment revenues will help generate higher revenues for the company.
The deal is expected to be earnings accretive by 2018. The company also raised its EPS outlook for fiscal 2016 from $7.85 to $8. Zimmer Biomet Holdings plans to issue $750 million in senior unsecured notes to fund the acquisition.
Medtronic (MDT) and Johnson & Johnson (JNJ) are some of the company’s other major competitors in the spine market. Investors can invest in the iShares Edge MSCI Min Vol USA ETF (USMV). ZBH accounts for ~0.28% of USMV’s total holdings.