April 24, 2014 / 3:51 PM / 3 years ago

TRLPC: Zimmer to tap with $12B in debt for Biomet buy

4 Min Read

NEW YORK, April 24 (Reuters) - Medical device maker Zimmer Holdings Inc is expected to tap the market next week with a $12.01 billion credit facility to back its acquisition of Biomet Inc from a consortium of private equity sponsors, sources told Thomson Reuters LPC.

The facility comprises a $7.66 billion, 364-day bridge loan to bonds, the same sources said. The financing also includes a fully committed $3 billion, five-year term loan and a $1.35 billion, five-year revolver.

Credit Suisse is arranging the transaction.

The bridge loan is expected to be replaced with an investment grade bond before the acquisition closes. The bridge is not expected to be drawn before that time, according to sources.

The Zimmer deal comes on the heels of a slew of other healthcare acquisition transactions also announced this week.

Among the deals, Novartis AG and GlaxoSmithKline Plc agreed to trade some $20 billion in assets, while Eli Lilly and Co agreed to buy Novartis's animal health business for $5.4 billion.

Valeant Pharmaceuticals International Inc also made an unsolicited $47 billion bid for Botox-maker Allergan Inc.

Though the loan financing component of some of those deals is not yet public, loan bankers are welcoming the pickup in acquisition transactions.

"The much anticipated pickup in M&A seems to be materializing," said a banker following the situation.

Zimmer deal

Bankers watching the Zimmer transaction expect the company to syndicate the loans among lenders to both Zimmer and Biomet. The bridge loan will likely be offered only to selective banking relationships. The revolver and term loan, meanwhile, are expected to be offered to a wider group of lenders.

Ratings are anticipated in the triple-B range.

Zimmer announced Thursday it would buy Biomet, an orthopedic products company, in a deal valued at about $13.35 billion to broaden its portfolio of products that treat bone and joint-related disorders.

After being taken private in 2007 for $11.4 billion, Biomet currently belongs to affiliates of Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co and TPG.

The consortium had been planning to take the company public, filing for an IPO last month, according to Reuters.

Zimmer will pay $10.35 billion in cash and issue $3 billion in shares to Biomet shareholders.

Zimmer said it expected to fund the cash portion of the deal with cash on hand and $3 billion from a senior unsecured term loan and a senior note offering.

Proceeds from the loans will also refinance Zimmer's debt, including its existing $250 million notes due 2014 and bank debt outstanding, as well as certain Biomet debt, according to a Zimmer's press release.

Credit Suisse was Zimmer's financial advisor. White & Case LLP was legal advisor.

Biomet was advised by Bank of America Merrill Lynch, Goldman Sachs, Cleary Gottlieb Steen & Hamilton LLP and Weil, Gotshal & Manges LLP.

Credit Suisse declined to comment. Zimmer representatives did not return calls by press time.

The acquisition is expected to close in the first quarter of 2015. (Editing By Jon Methven and Leela Parker Deo)

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