ISS says Biomet shareholders should reject buyout

NEW YORK (Reuters) - Influential shareholder advisory firm Institutional Shareholder Services recommended in a report that Biomet Inc. BMET.O shareholders vote against a $10.9 billion private-equity buyout of the orthopedic device maker, saying the price is not high enough.

Biomet agreed in December to be bought by a private-equity consortium, which includes affiliates of the Blackstone Group BG.UL, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. KKR.UL and TPG TPG.UL.

The fundamentals of the hip and knee reconstruction market have improved and shares in Biomet's peers have seen their shares rally, ISS wrote in the report, which was released on Tuesday.

"Although the deal terms appear fair as of the time of the deal's announcement in December, the rally of the peer group" and its main joint reconstruction business "imply that there is little takeover premium in the current $44 offer price," the ISS report said.

The recommendation comes ahead of a June 8 shareholder vote on the deal.

Biomet could not be reached immediately for comment.

ISS advises financial institutions on how to vote their shares.

Biomet shares fell 10 cents, or 0.2 percent, to $43.50 in morning trading on Nasdaq.