Biomet’s Future

The New York Times has an article this morning on Biomet (Biomet Won’t Say So, but Investors Expect a Sale).
Well, I don’t expect one. It’s hard to say, but I don’t think Biomet will be sold any time soon. Sure, it could happen, but let’s look at the facts. The company is in a very strong position. Unlike many companies in similar situations, Biomet can easily afford to walk away from a deal it doesn’t like.

Many analysts project that a successful takeover bid would have to top $10 billion. And industry experts say that Biomet, which is nearly debt-free, will be under no pressure to accept a low bid. Biomet reported net income of $307.6 million on revenues of $1.49 billion in the nine months that ended Feb. 28.
“It’s big enough to survive as a stand-alone company so this won’t be a distress sale,” said Anthony G. Viscogliosi, a principal at Viscogliosi Brothers, a consulting and investment firm in New York that specializes in orthopedics.

There’s also the question of who the buyer would be.

The management shake-up and CNBC report sparked speculation about who might acquire Biomet. Those prominently mentioned included Medtronic, which is a broad-based medical device maker and a leader in spinal implants that has historically denied interest in the rest of the orthopedics business, and Abbott Laboratories, a drug maker that has been diversifying into orthopedic devices as part of a strategy to develop a broad portfolio of medical products.
Bids by Zimmer, DePuy and Stryker are viewed as less likely for many reasons, including antitrust concerns. But the British company Smith & Nephew is a major orthopedics company with complementary strengths that many would see as a logical partner in a merger of equals. The combined company would have a 20 percent share of the knee and hip market, nearly the same as Stryker.

Let’s round up the usual suspects. I think Medtronic (MDT) is at the top of the list, followed by Johnson & Johnson (JNJ).

Posted by on April 7th, 2006 at 10:06 am


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