Zimmer Holdings (ZMH) Acquires Abbott's Spine Business

September 4, 2008 4:10 PM EDT

Zimmer Holdings, Inc. (NYSE: ZMH) announced that certain of its subsidiaries have agreed to acquire the Abbott Spine business from Abbott (NYSE: ABT) for approximately $360 million in cash. Zimmer said it expects to fund the purchase price from cash on hand and borrowings under existing credit facilities.

The acquisition is expected to close in the fourth quarter of 2008. The boards of directors of both companies have approved the transaction, which is subject to regulatory approvals and other customary closing conditions. Stockholder approval is not required. Abbott Spine had 2007 revenues of $109 million. Zimmer Spine's revenues for the same period were $197 million.

Zimmer expects the transaction to be approximately $0.03 dilutive to adjusted diluted earnings per share in the fourth quarter of 2008, between $0.08 and $0.10 dilutive in 2009 and neutral to slightly dilutive in 2010. These estimates exclude one-time charges related to the purchase price allocation for acquired inventory, restructuring and integration charges, as well as any in-process research and development charge incurred in connection with the transaction. The definitive purchase price allocation will be completed after the close of the transaction; however, Zimmer expects to record an in-process research and development charge of approximately $50 million in the fourth quarter and to step up the value of acquired inventory by approximately $25 million. Zimmer also expects to incur $40 to $50 million in restructuring and integration costs in connection with the transaction, primarily related to the integration of the separate global sales networks.[SM]

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