June 7, 2016 / 11:31 AM / 2 years ago

Zimmer props up spine device business with $1 billion LDR buy

(Reuters) - Zimmer Biomet Holdings Inc (ZBH.N) agreed to buy fellow medical device maker LDR Holding Corp LDRH.O for about $1 billion deal to expand in the market for treating spine disorders.

The $37 per share offer represents a premium of about 64 percent to LDR’s Monday close.

LDR’s shares were trading at $36.94 on Tuesday, on track for their best day ever. They briefly climbed above the offer price to $37.09 in early trading.

Zimmer’s stock was down 2.6 percent at $118.28.

The LDR deal follows Medtronic Plc (MDT.N) in May picking up a stake in Israeli robotics company Mazor Robotics Ltd (MZOR.TA) (MZOR.O) and agreeing to use Mazor’s robotic guidance systems that assist surgeons in spine and brain operations.

The Medtronic/Mazor deal in May and the Zimmer announcement suggest consolidation may finally be taking shape in the spine market, Wells Fargo analysts wrote on Tuesday.

Founded in France in 2000, LDR develops surgical technology for spine disorders.

The company’s biggest product is Mobi-C CDR, the first and only U.S. Food and Drug Administration approved device to treat both one- and two-level adjacent damaged cervical discs.

Cervical disc replacement (CDR) represents the fastest-growing segment within the $10-billion spine industry, the companies said.

However, the Wells Fargo analysts said they had been cautious on the near-term outlook for Mobi-C as the cervical disc market has not grown as quickly as expected, largely due to reimbursement issues.

Also, competition is likely to rise, with Medtronic’s device, Prestige LP, expected to get approval for the same indication as Mobi-C this year, the analysts said.

Mobi-C, approved in 2013, generated sales of about $17 million in the quarter ended March 31.

Warsaw, Indiana-based Zimmer makes a host of products, including those for orthopedic reconstruction, sports medicine, trauma, spine and bone healing.

The deal is expected to close in the third quarter.

Goldman Sachs is Zimmer’s financial adviser and White & Case the legal adviser. BofA Merrill Lynch is LDR’s financial adviser and Andrews Kurth its legal adviser.

Up to Monday’s close, LDR’s shares had fallen 10 percent this year.

Reporting by Natalie Grover in Bengaluru; Editing by Sriraj Kalluvila

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