Zimmer Submits ‘Remedy Package’ for European Blessing of Biomet Deal

Zimmer Holdings Inc. has proposed a remedy package to the European Commission (the “EC”) to facilitate the EC’s approval of Zimmer’s proposed acquisition of Biomet.

Zimmer bigwigs have been working closely with the EC to develop a mutually-acceptable solution to address the agency’s concerns about the proposed $13.4 billion acquisition of Biomet. The acquisition would make Warsaw, Ind.-based Zimmer the second-largest seller of orthopedic products behind Johnson & Johnson, boosting its presence in the fast-growing sports medicine sector. Zimmer officials said the combined company will have three divisions: a knee and hip device and bone cement business; a business focused on sports medicine, implants used in the extremities, trauma products, biologic devices, and surgical items; and a business that makes spine, craniomaxillofacial, and dental implants and bone healing products.

The remedy package proposed by Zimmer includes the divestiture of one unicompartmental knee brand and one elbow brand in the European Economic Area (“EEA”) and one total knee brand in two EEA countries. The EC will market-test the proposed remedy package in the coming days. In parallel, the EC has “stopped the clock” on its review of the proposed merger.

In a formal statement, Zimmer officials said they continue to be encouraged by the substantial progress made so far in connection with the overall regulatory process and they still expect to close the transaction in the first quarter of 2015.

The transaction also 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.

As Zimmer works out the kinks in its Biomet deal, rumors continue to swirl about Stryker Corp. possibly making a bid for United Kingdom-based Smith & Nephew plc. Last month, Bloomberg reported that Stryker is discussing the financing of a deal and its potential antitrust hurdles with advisers, citing unidentified sources because the discussions are private. Smith & Nephew and its advisers are aware of Stryker’s interest, according to reports.

Stryker could still decide against the purchase, sources told Bloomberg. The deal would be structured as an inversion, which has received a lot of recent media and government attention as of late. Recent moves by the U.S. Department of the Treasury have sought to make such deals less attractive.

However, according to Bloomberg’s source, Stryker officials see “strong strategic reasons” to pursue a deal aside from tax advantages, and an inversion “wouldn’t be essential” to make the deal work.