Zimmer Biomet (ZBH) - Get Report Shares rose after the of healthcare product seller said it planned to spin off its spine and dental units into an independent publicly traded company and focus on its orthopedics business.
"For Zimmer Biomet, the transaction is an important step toward shifting our portfolio mix to higher-growth markets where we have a clear path to leadership,” President and Chief Executive Bryan Hanson said in a statement.
“Following the spinoff, Zimmer Biomet will remain a leader in attractive segments within the orthopedics market, including knees, hips, sports medicine, extremities and trauma,” the company said.
After the deal closes, Hanson will continue as president and CEO of Zimmer Biomet. The company said its search for a CEO of the spunout businesses was "in its final stages."
The company hopes to complete the spinoff in mid-2022. It plans the spinoff as a tax-free distribution to shareholders. The deal is subject to conditions including final board approval and an Internal Revenue Service opinion that the deal will be tax-free.
The move should speed growth in adjusted earnings per share and widen the company's profit margins based on adjusted EBITDA and operations by 1.25 percentage on a pro forma basis, "making its adjusted margin profile compelling among [medical technology companies,” Zimmer Biomet said.
Zimmer expects the transaction to add half a percentage point to revenue growth during the company's five-year strategic-planning period, it said.
The company said it intended to maintain its investment-grade rating while continuing to invest in innovation and executing tuck-in acquisitions in higher growth markets.
Also on Friday, Zimmer posted a fourth-quarter loss of $137.4 million, or 67 cents a share, swinging from a profit of $1.13 billion, or $5.47 a share, in the year-earlier period.
Fourth-quarter revenue of $2.09 billion fell 1.9% from the year earlier as the covid pandemic dulled demand for medical procedures.
Zimmer shares closed Thursday at $160.73, up 1.4%. They'd climbed 23% in the six months through Thursday.