Zimmer's acquisition of Biomet is an orthopedic earthquake in Warsaw

$13 billion buyout represents a huge change for the 'orthopedic capital of the world.'

Posted on April 24, 2014 at 5:07 p.m.

ELKHART — An orthopedic earthquake struck Indiana’s business world Thursday and the epicenter was in little old Warsaw, Ind.

In one of the area's big business stories of the year, a leading manufacturer of orthopedic implants, Zimmer, announced on Thursday plans to acquire rival Biomet.

From a distance, it sounds like just another merger.

But for Warsaw, it’s probably the biggest story the community has seen in decades, and the impact could send reverberations through much of the medical device industry as Zimmer further expands its reach through the achievements of Biomet.

For those unfamiliar with the history, the orthopedic industry began in Warsaw in 1895 when Revra DePuy began making fiber splints. In 1927, J.O Zimmer, a former employee of DePuy, established his own company and began making aluminum splints.

A third big player surfaced in 1977, when four men — some of whom had past affiliations with Zimmer — established Biomet. Within a few years, the small start-up emerged as a significant player in the artificial hip and knee market.

Those three companies — Zimmer, Biomet and DePuy — at one point and maybe still today manufactured more than 50 percent of all artificial hips and knees sold in the United States and put Warsaw on the map as the Orthopedic Capital of the World.

Together those three companies have thrived from a specialized work force, and in turn gave Kosciusko County a nearly recession-proof economy that has benefited from the growing elderly segment of the U.S. population.

How big and impressive was Thursday's $13.3 Billion deal Zimmer will pay $10.35 billion in cash and issue $3 billion in shares to Biomet shareholders, according to various news reports.

For Biomet’s work force and maybe even some at Zimmer, Thursday’s announcement will lead to speculation and worry about job security.

More than likely, Zimmer will eliminate some jobs because of duplication and the need for efficiency. How many is anyone's guess.

But for now, it’s a great new era for Zimmer.

According to a report on CNBC.com, the deal moves Zimmer more firmly into the top position in the global hip and knee market and places it second in the overall orthopedic market, behind Johnson & Johnson, which owns DePuy.

The CNBC story also predicted the buyout will allow Zimmer to double the size of its spine and dental business; broaden its portfolio of products to treat bones, knees and hips; and give it an entry into the smaller but growing field of sports medicine.

"Biomet is a perfect fit for us," Zimmer Chief Executive David Dvorak told analysts and investors on a conference call.

A perfect fit. That is a term patients probably thought of prior to receiving specially designed artificial hips and knees manufactured in Warsaw and elsewhere. But those high-tech pairings in the human body have caused some patients severe physical pain and resulted in costly lawsuits for some orthopedic companies.

It will likely take years to see if changes announced Thursday will become a perfect fit for Zimmer or an irritant for people in Warsaw.



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