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Zimmer Biomet (ZBH) Boosts Portfolio With A&E Medical Buyout

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Zimmer Biomet Holdings, Inc. (ZBH - Free Report) recently completed the acquisition of Vance Street Capital portfolio company, A&E Medical for a total transaction value of $250 million. The acquisition of A&E Medical, which has a comprehensive portfolio of sternal closure devices, is expected to broaden Zimmer Biomet's Dental, Spine & Craniomaxillofacial and Thoracic (CMFT) product category.

A&E Medical was originally acquired by Vance Street Capital in 2016.

Deal Details

Out of the total deal value of $250 million, Zimmer Biomet paid $150 million in cash at closing and the remaining $100 million in cash is payable in 2021. 

A&E Medical’s complete portfolio of sternal closure devices include sternal sutures, cable systems and rigid fixation. It also includes a range of single-use complementary temporary pacing wire and surgical punch products.

Strategic Importance

Zimmer Biomet estimates the global sternal closure business to grow at a high single-digit percentage each year.  

With the acquisition, Zimmer Biomet targets fast expansion in this high-growth market of sternal closure devices. According to the company, A&E Medical's business of sternal closure devices will highly complement Zimmer Biomet’s current portfolio, thereby helping to address a variety of unmet patient and surgical needs.

This latest development aligns with the company’s active portfolio management strategy and the ongoing transformation of business to target long-term growth.

Zimmer Biomet's Long-Term Growth Strategy

In 2019, Zimmer Biomet introduced a long-term plan to begin delivering 2-3% growth in 2020 and stabilize its business. In order to achieve the goal, the company designed a three-pillar strategy for 2020 and beyond.

First, the company targets to be the most preferred organization to work at. Second, Zimmer Biomet is trying to build the brand image of a trusted partner to its stakeholders. Third, the company wants to deliver high shareholder return. For this, Zimmer Biomet is planning to implement a five-year plan that will help improve the company's financials.

In this regard, Zimmer Biomet should benefit from favorable long-term trends that point toward sustained growth, driven by obesity, wear and tear of joints as a result of highly active lifestyles, growth in emerging markets, new material technologies, advances in surgical techniques and proven clinical benefits of joint replacement procedures.

More importantly, the percentage of population over the age of 65 in the United States, Europe, Japan and other regions is expected to nearly double by the year 2030. In the United States, the oldest baby boomers are now pushing their retirement. We believe Zimmer Biomet is benefiting from this aging demography since knee and hip joints tend to wear out with age and therefore require replacement.

Price Performance

Shares of the company have lost 0.4% in the past year compared with the industry’s 3.8% fall. In the said time frame, the S&P 500 has risen 5.2%.

Zacks Rank & Key Picks

Currently, Zimmer Biomet carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are ResMed (RMD - Free Report) , Thermo Fisher Scientific (TMO - Free Report) and Align Technology (ALGN - Free Report) .

ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher’s long-term earnings growth rate is estimated at 18%. It currently carries a Zacks Rank #2.

Align Technology’s long-term earnings growth rate is estimated at 18.3%. It currently carries a Zacks Rank #2.

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