ZIMMER BIOMET HOLDINGS, INC. - FORM 8-K - EX-99.2

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EX-99.1 - EX-99.1 - ZIMMER BIOMET HOLDINGS, INC.	d713847dex991.htm
EX-99.3 - EX-99.3 - ZIMMER BIOMET HOLDINGS, INC.	d713847dex993.htm
8-K - 8-K - ZIMMER BIOMET HOLDINGS, INC.	d713847d8k.htm

Combination Creates Leading Innovator in the

Musculoskeletal Industry

April 24, 2014

David Dvorak

President and Chief Executive Officer

Jim Crines

EVP, Finance, and Chief Financial Officer

Exhibit 99.2

Cautionary Statement Regarding Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,”

“projects,” “assumes,” “guides,” “targets,” “forecasts,” and “seeks” or the negative of such terms or other variations on such terms or comparable terminology.

Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger between Zimmer and LVB Acquisition, Inc.

(“LVB”), the parent company of Biomet, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions,

the expected timing of completion of the transaction and other statements that are not historical facts. Such statements are based upon the current beliefs and

expectations of Zimmer’s management and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially.

These risks and uncertainties include, but are not limited to: the possibility that the anticipated synergies and other benefits from the proposed merger of Zimmer

and LVB will not be realized, or will not be realized within the expected time periods; the inability to obtain regulatory approvals of the merger (including the

approval of antitrust authorities necessary to complete the transaction) on the terms desired or anticipated; the timing of such approvals and the risk that such

approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction; the risk that a

condition to closing the transaction may not be satisfied on a timely basis or at all; the risk that the proposed transaction fails to close for any other reason; the

risks and uncertainties related to Zimmer’s ability to successfully integrate the operations, products and employees of Zimmer and Biomet; the effect of the

potential disruption of management’s attention from ongoing business operations due to the pending merger; the effect of the announcement of the proposed

merger on Zimmer’s and Biomet’s relationships with their respective customers, vendors and lenders and on their respective operating results and businesses

generally; risks relating to the value of the Zimmer shares to be issued in the transaction; access to available financing (including financing for the acquisition or

refinancing of Zimmer’s or Biomet’s debt) on a timely basis and on reasonable terms; the outcome of any legal proceedings related to the proposed merger; the

risks and uncertainties normally incidental to the orthopaedic industry, including price and product competition; the success of the companies’ quality and

operational excellence initiatives; changes in customer demand for Zimmer’s or Biomet’s products and services caused by demographic changes or other factors;

the impact of healthcare reform measures, including the impact of the U.S. excise tax on medical devices; reductions in reimbursement levels by third-party

payors and cost containment efforts of healthcare purchasing organizations; dependence on new product development, technological advances and innovation;

shifts in the product category or regional sales mix of Zimmer’s or Biomet’s products and services; supply and prices of raw materials and products; control of

costs and expenses; the ability to obtain and maintain adequate intellectual property protection; the ability to form and implement alliances; challenges relating to

changes in and compliance with governmental laws and regulations, including regulations of the U.S. Food and Drug Administration (the “FDA”) and foreign

government regulators, such as more stringent requirements for regulatory clearance of products; the ability to remediate matters identified in any inspectional

observations or warning letters issued by the FDA; changes in tax obligations arising from tax reform measures or examinations by tax authorities; product liability

and intellectual property litigation losses; the ability to retain the independent agents and distributors who market Zimmer’s and Biomet’s products; dependence

on a limited number of suppliers for key raw materials and outsourced activities; changes in general industry and market conditions, including domestic and

international growth rates and general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the

impact of the ongoing economic uncertainty affecting countries in the Euro zone on the ability to collect accounts receivable in affected countries. For a further

list and description of such risks and uncertainties, see Zimmer’s periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”). Copies of

these filings, as well as subsequent filings, are available online at www.sec.gov, www.zimmer.com or on request from Zimmer. Zimmer disclaims any intention or

obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in

the companies’ respective periodic reports. Readers of this communication are cautioned not to place undue reliance on these forward-looking statements, since,

while management believes the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-

looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this communication.

Additional information and where to find it

Zimmer will file with the SEC a registration statement on Form S-4, in which a consent solicitation

statement will be included as a prospectus, and other documents in connection with the proposed

acquisition of LVB. The consent solicitation statement/prospectus will be sent to the stockholders of

LVB. INVESTORS AND SECURITYHOLDERS OF LVB ARE URGED TO READ THE CONSENT

SOLICITATION/PROSPECTUS, AND ANY OTHER FILINGS THAT MAY BE MADE WITH THE SEC

IN CONNECTION WITH THE MERGER WHEN THEY BECOME AVAILABLE, AS THEY WILL

CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. The registration statement and

consent solicitation statement/prospectus and other documents which will be filed by Zimmer with the

SEC, when filed, will be available free of charge at the SEC’s website at www.sec.gov or from Zimmer

at www.zimmer.com. Such documents are not currently available. You may also read and copy any

reports, statements and other information filed by Zimmer, LVB and Biomet with the SEC at the SEC

public reference room at 100 F Street N.E., Room 1580, Washington, D.C. 20549. Please call the SEC

at (800) 732-0330 or visit the SEC’s website for further information on its public reference room.

Certain executive officers and directors of LVB have interests in the proposed transaction that may

differ from the interests of stockholders generally, including benefits conferred under retention,

severance and change in control arrangements and continuation of director and officer insurance and

indemnification. This communication shall not constitute an offer to sell or the solicitation of an offer to

buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer,

solicitation or sale would be unlawful prior to appropriate registration or qualification under the

securities laws of such jurisdiction. No offering of securities shall be made except by means of a

prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Creates leading musculoskeletal innovator

to shape solutions for the evolving

healthcare market

Transaction overview

Transaction overview

Acquisition of Biomet for $10.35 billion in cash and aggregate amount of

Zimmer shares valued at ~$3.0 billion

(1)

Biomet shareholders to own approximately 16% of combined company

closing

Leverage of approximately 3.7x total debt / Adjusted EBITDA (4.0x

excluding synergies) at closing

Fully committed financing structure in place

Closing expected in the first quarter of 2015 (subject to regulatory

approvals)

Note:

Financial figures and statistics presented on a Pro Forma basis.

(1)

Zimmer

issue

fixed

number

valued

$91.73

per

(the

day

volume

weighted

average

price

immediately

preceding

the

signing of the merger agreement)

Strategic rationale

Biomet fits Zimmer’s value creation framework

Driving operating margin expansion through scale

Operational Excellence:

•

Drive advanced manufacturing

capabilities and streamline

logistics

Capital Allocation:

•

Enhances revenue

diversification by creating

critical mass in faster

growing and adjacent

businesses

Expands innovation

capabilities

Strengthens presence in

emerging markets

Achieve approximately

$270mm in revenue and

operating synergies by 2017

Source of funding for growth

Opportunity to accelerate

business model innovation

Meets ROIC targets

Combined cash flow from

operations of more than

1.5x Zimmer stand-alone

Focus free cash flow on debt

repayment and dividend

Potential for cash flow

improvement through

streamlined capital spending

and working capital

efficiencies

Increases competitiveness

in core franchises

Growth:

Comprehensive portfolio of solutions and commitment to innovation

Establish broader portfolio of

musculoskeletal products, technologies and

services

Combine shared heritage of engineering

excellence and material science expertise

Accelerate pipeline of clinically relevant

solutions that address unmet needs

Partner with providers, patients and payers

to improve outcomes in a cost effective

manner

Shaping how solutions are developed and delivered in the rapidly

evolving healthcare industry

($ in millions)

Pro forma 2013 R&D

$204

$156

$360

Musculoskeletal diversification and scalable platforms

Enhance competitive offering in Knees and Hips

Enhance critical mass in faster growing Sports Medicine, Extremities

and Trauma categories

Establish scalable platforms in Surgical, Spine and Dental

Accelerate business model innovation with advanced manufacturing

and streamlined logistics

Global distribution channels and cross-selling opportunities

Combine customer focused sales forces with comprehensive global

reach

Leverage complementary sales channels to achieve cross-selling

opportunities

Capitalize on enhanced scale to drive increased focus on surgeon

specialties

Transform go-to-market capabilities to address the needs of

consolidating delivery networks

Enhances Zimmer stockholder value

More diversified and predictable revenues

Significant cash flow generation

Anticipated double-digit accretion to adjusted earnings

Deal ROIC expected to exceed WACC by the end of year three

Enterprise ROIC expected to exceed WACC in year one

Combined portfolio

Biomet: $3.14bn

(2)

$0.4

$0.6

$1.0

$0.2

$0.3

Zimmer: $4.62bn

(1)

$0.4

$0.2

$0.5

$1.3

$1.9

Combination creates leading innovator in the musculoskeletal industry

(1)

Zimmer Surgical, Biologics & Other includes surgical, bone cement and tourniquet products.

(2)

Biomet Other includes Biologics, cardiothoracic solutions, neurosurgical solutions, operating room supplies, casting materials, general surgical

instruments, wound care products and other surgical products.

Pro forma: $7.8bn

$2.0

$2.8

$0.7

$0.5

$0.6

$1.2

2013 revenue breakdown by category ($ in billions)

Knee

37%

Hip

26%

Sports,

Extremities &

Trauma

15%

Spine

Dental

Surgical,

Biologics &

Other

Knee

31%

Hip

21%

Sports,

Extremities &

Trauma

20%

Spine & Bone

Healing

13%

Dental

Other

Knee

41%

Hip

29%

Extremities &

Trauma

11%

Spine

Dental

Surgical,

Biologics &

Other

Combination creates leading pure-play musculoskeletal company

Source:

Zimmer management and company filings.

Note:

Numbers represent revenue estimate and market share in $45bn musculoskeletal industry

17%

21%

10%

Market

13%

Top musculoskeletal players –

2013 revenue and market share

($ in billions)

$9.2

$7.8

$5.8

$4.62

$3.2

$3.14

$3.0

Synergies and integration

Overview of anticipated synergies

Expect to achieve $270 million of net annual operating earnings

synergies by the third year post-closing

Consistent with other precedent medical device mergers

Costs to achieve synergies estimated at 1.5x run-rate synergies in

aggregate split over two years ($405 million in aggregate)

Net synergy phase-in

Key action items

Reduce manufacturing lead time

Strategic sourcing

Streamline redundancies

Natural attrition

$135.0

$202.5

$270.0

Year 1

2015E

Year 2

2016E

Year 3

2017E

($ in millions)

Expect to achieve majority of synergies through disciplined expense management,

advanced manufacturing and streamlined logistics

Prepare “Day 1”

plans

Develop detailed

integration plans

Integration approach: driving value creation

Maintain focus on execution of existing business, continuity of customer

support and development efforts

Define go-forward operating style (i.e., retain entrepreneurial and team

culture)

Leverage co-located operations to drive rapid collaboration

Focus on retaining talent from both Zimmer and Biomet

Joint steering team with representatives from both Zimmer and Biomet

Experienced set of commercial and functional integration teams

Integration Planning & Preparation

Implementation

Launch

teams

Confirm

synergy targets

Develop operating

model transition

Execute

integration plans

Track

synergies

April 2014 through closing

Early 2015 –

2017

Deal

announcement

Filings

complete

Final approval /

Closing

Conclusion

Summary

Strengthens the Company’s competitiveness in $45 billion

musculoskeletal market

Delivers a comprehensive portfolio of innovative solutions with expanded

cross-selling opportunities

Enhances musculoskeletal diversification with strong scalable platforms

in faster growing Sports Medicine, Extremities and Trauma categories

Provides significant operating efficiencies that benefit all constituents

and address evolving market demands

Bolsters cash flow in support of debt repayment and dividends

Leverages experienced management team with track record of

successful execution and integration

Highly aligned with Zimmer value creation framework focus on

growth, operational excellence and prudent capital allocation

Questions & Answers

ZIMMER BIOMET HOLDINGS, INC. - FORM 8-K - EX-99.2 - April 24, 2014

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ZIMMER BIOMET HOLDINGS, INC. Reports