IBJNews

Timing looks right for Biomet IPO

Back to TopCommentsE-mailPrintBookmark and Share

The owners of Warsaw-based Biomet Inc. may have gotten the timing right this time.

The group of private equity funds that acquired Biomet in June 2007 last week filed to take the company back onto the public markets, selling $100 million in stock later this year.

The company is owned by Blackstone Group, Goldman Sachs, KKR & Co. and TPG Capital.

Their timing the first time was poor. Three months after the group paid a whopping $11.4 billion for Biomet, orthopedic implant makers settled with the U.S. Department of Justice, agreeing to alter their cozy consulting relationships with surgeons, which dampened sales. Then three months later, the national recession hit, causing a sharp deceleration in growth rates of knee and hip replacements.

This time, Biomet’s owners are hitting the orthopedics market on the upswing, according to Bernstein Research analyst Lisa Clive. In a March 7 report to investors, Clive noted that domestic consumer sentiment continues to strengthen, which suggests more Americans will continue to go back to get the hip and knee replacements they put off during the prolonged economic downturn.

That trend emerged in the second half of 2013 and now looks like it will continue throughout this year.

“In the U.S., the demand-driven nature of the health care system means that we should see a continuation of the orthopedic market recovery that began in the second half of 2013, as consumer sentiment trends continue to stabilize close to pre-recession levels,” Clive wrote. She predicts U.S. knee implant sales will grow 5 percent and hip sales 6 percent this year, excluding currency fluctuations.

Biomet’s sales of knee implants have grown faster than the industry the past two years, according to Clive. Biomet sales of hip implants equaled the industry’s in 2013 and exceeded it the year before.

Despite global recession headwinds, Biomet has increased its profitability since 2007, financial reports to its public bondholders show.

Biomet has seen earnings before interest, taxes, depreciation and amortization rise, when adjusted for extraordinary items, from $719 million in 2007 to nearly $1.1 billion last year, according to a Deutsche Bank Securities Inc. analysis.

Cash flow from operations was $440 million in 2007, but now stands at $523 million.

Part of those improvements came through sales growth, from $2.1 billion in 2007 to nearly $3.1 billion last year. Sales to markets outside the United States and Europe more than doubled, from $205 million to more than $480 million. Biomet also acquired the trauma implant business from crosstown rival DePuy Orthopaedics Inc., which helped boost overall sales.

And part of the improvement has come from cutting more than $170 million in annual expenses. By June 30, Biomet will have closed seven of the 18 factories it operated in 2007, according to Deutsche Bank.

Still, Deutsche Bank analyst Kristen Stewart estimates the value of Biomet’s entire business at $11 billion to $13 billion—not far from the price the owners paid seven years ago.

That’s largely because growth prospects for orthopedic implant makers, in spite of recent improvements, are still not where they were in 2007.

“A lot has changed since Biomet was taken private, and the overall growth for the worldwide hip/knee market outlook has slowed from the high-single-digit growth rate experienced in 2007 to the low- to mid-single-digit growth expected in 2014,” wrote Glenn Novarro, an analyst at RBC Capital Markets.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. So as I read this the one question that continues to come to me to ask is. Didn't Indiana only have a couple of exchanges for people to opt into which were very high because we really didn't want to expect the plan. So was this study done during that time and if so then I can understand these numbers. I also understand that we have now opened up for more options for hoosiers to choose from. Please correct if I'm wrong and if I'm not why was this not part of the story so that true overview could be taken away and not just parts of it to continue this negative tone against the ACA. I look forward to the clarity.

  2. It's really very simple. All forms of transportation are subsidized. All of them. Your tax money already goes toward every single form of transportation in the state. It is not a bad thing to put tax money toward mass transit. The state spends over 1,000,000,000 (yes billion) on roadway expansions and maintenance every single year. If you want to cry foul over anything cry foul over the overbuilding of highways which only serve people who can afford their own automobile.

  3. So instead of subsidizing a project with a market-driven scope, you suggest we subsidize a project that is way out of line with anything that can be economically sustainable just so we can have a better-looking skyline?

  4. Downtowner, if Cummins isn't getting expedited permitting and tax breaks to "do what they do", then I'd be happy with letting the market decide. But that isn't the case, is it?

  5. Patty, this commuter line provides a way for workers (willing to work lower wages) to get from Marion county to Hamilton county. These people are running your restaurants, hotels, hospitals, and retail stores. I don't see a lot of residents of Carmel working these jobs.

ADVERTISEMENT