BREAKING: Zimmer Biomet to spin off spine and dental businesses

Zimmer Biomet (NYSE:ZBH) — one of the world’s largest orthopedic device companies — will be a bit smaller going forward.

The Warsaw, Ind.–based company announced today that it will spin off its spine and dental businesses into a new, independent, publicly traded company called NewCo. Zimmer Biomet plans to complete the transaction by mid-2022.

The businesses that fall under the NewCo banner made up nearly 13% of Zimmer Biomet revenues over the past two years, bringing in $1.022 billion in 2019 and $897 million in 2020. Differentiated spine products to help power NewCo’s growth include the Rosa One Spine robotic surgery system, the Mobi-C cervical disc and The Tether.  Dental boasts a whole suite of oral reconstruction products.

Zimmer Biomet has been in the midst of a major reorganization in recent years as CEO Bryan Hanson seeks to refocus the businesses, with the company even recently announcing Medtronic veteran Ellie Humphrey’s hiring as its first chief transformation officer.

Spinning off the spine and dental businesses will allow the two companies to better focus on better use of resources and leading their respective spaces, company officials said.

“This transaction will position us to prioritize resources, simplify our operating models and deliver greater value through two independent publicly traded companies,” Hanson said in a news release.

For Zimmer Biomet, the spinoff will be accretive to revenue growth by approximately 0.5% over the course of the company’s five-year strategic planning period, accelerate adjusted earnings per share growth and boost operating margins, according to the company.

Hanson will continue as Zimmer Biomet CEO; a NewCo CEO search is in its final stages. Zimmer Biomet said it will announce a NewCo board of directors, management and headquarters as it wraps up arrangements.

Completing the spinoff depends on final Zimmer Biomet board approval, receipt of a favorable opinion and Internal Revenue Service ruling over the transaction’s tax-free nature, and the effectiveness of a Form 10 registration statement that will be filed with the U.S. Securities and Exchange Commission.

ZBH shares were up 1.71%, to $163.50, on the news this morning. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was up 0.8%.

Beating expectations in Q4

News of the planned spinoff came on the same day that Zimmer Biomet announced Street-beating Q4 results.

Zimmer Biomet posted profits of $333.7 million, or $1.59 per share, off $2.085 billion in sales for the quarter ended Dec. 31, 2020, for a bottom-line gain of 4.1% on a top-line cut of –1.9% compared with Q4 2019.

Adjusted to exclude one-time items, earnings per share were $2.11, a nickel ahead of The Street, where analysts were looking EPS of $2.06 on sales of $2.08 billion.

Zimmer Biomet is still holding off on releasing financial guidance for 2021, citing uncertainty related to the COVID-19 pandemic — a position more common for small-cap companies. (Stryker, for example, has released 2021 guidance.)

“The fourth quarter saw continued pressure from COVID and its impact on the recovery of elective procedures, yet our core business remained strong as did our operational execution to close out 2020,” Hanson said. “Against that backdrop, we continue the transformation of our business in order to drive growth and increase shareholder value.”

Original Article: (https://www.massdevice.com/breaking-zimmer-biomet-to-spin-off-spine-and-dental-businesses/)