The European Commission is concerned that the $13.4 billion acquisition of Biomet by Zimmer ($ZMH) will result in price increases due to reduced competition in orthopedic implants in the European Economic Area (EEA). In order to allay these fears, Zimmer has agreed to divest three businesses in specific European markets.
The acquisition will not proceed until one or more purchasers are found for the divested businesses and approved by the EC, according to a statement from them. Still, Zimmer reiterated an April close for the deal--which would put it at almost precisely a year in the making since it was first announced in April 2014.
Zimmer has agreed to sell its Unicondylar Knee implant and Biomet's Discovery Elbow businesses across the EEA. In addition, it will sell the Biomet Vanguard Total Knee system in Denmark and Sweden. The buyer of the Vanguard assets will also receive a non-exclusive license and the rights and knowledge to make and market a replica of Vanguard knee elsewhere in the EEA.
All of the divested businesses will include any improvement or pipeline projects related to them, as well as any associated intellectual property, licenses, CE marks, contracts and key personnel. Zimmer is also obligated to supply the products for the divested businesses for an undisclosed transitional period.
"Orthopedic implants affect the mobility and quality of life of thousands of people across Europe. The remedies obtained by the Commission will ensure that patients continue to benefit from sufficient choice and innovation and that healthcare providers enjoy competitive prices." Margrethe Vestager, the commissioner in charge of competition policy, said in a statement.
The Vanguard Knee divestiture will transfer the better part of Biomet's market share to a competitor.
Zimmer previously stated in December that a divestiture of the three businesses in some EEA countries would be required, but this spells out the precise details for the first time.
Last week, Japanese regulators also approved the Zimmer-Biomet transaction.
Zimmer was up about 1% in early trading on the EC news; its shares are up 29% since the day before the deal was proposed on April 24, 2014.
- here are releases from Zimmer and the European Commission