ZimVie Inc., a provider of medical devices to the dental and spine markets, announced a definitive agreement to divest its spine business to H.I.G. Capital.
The deal, valued at $375 million, includes $315 million in cash plus a $60 million promissory note which accrues interest at 10% per annum.
ZimVie itself was spun out of orthopedic-focused Zimmer Biomet in March 2022 as a combination of its spine and dental businesses. For ZimVie, its two units have been on markedly different trajectories—higher-margin dental is expected to grow in the low single-digits range, while lower-margin spine has seen revenue fall from $634 million in 2018 to 2023's expected $408 million.
Shareholders viewed spine as a significant drag on the overall business and celebrated this week's strategic reorganization by pushing ZimVie's stock up nearly 60 percent.
With the acquisition, H.I.G. is picking up an assortment of core spine, motion preservation, and EBI bone healing product portfolios that it hopes to stabilize. The sponsor may have its hands full after taking on what analysts say is a business that is rapidly losing share and has “no near-term path to return to market growth.”
H.I.G., however, expressed optimism over the deal, with Managing Director Mike Gallagher noting the spine business's solid foundation. "We see a tremendous opportunity to partner with the spine leadership team to support best-in-class innovation and robust commercial execution," Gallagher said. The Miami-based firm, with $59 billion under management, aims to leverage its experience in medical device investments to enhance value for distributors, surgeons, and ultimately, patients.
"We are pleased to reach an agreement with H.I.G. Capital for the strategic sale of our spine business. The transaction avails us the opportunity to continue innovating and growing our dental commercial and innovation platforms while simultaneously reducing ZimVie's leverage profile," said ZimVie’s President and CEO, Vafa Jamali.
The deal received unanimous approval from ZimVie's Board of Directors, with an anticipated close in the first half of 2024, pending regulatory approval. According to ZimVie's announcement, sale proceeds will be used to pay down debt, which had been driving meaningful softness in the business' EPS given today's high rate environment.
Centerview Partners is serving as exclusive financial advisor and Cravath, Swaine & Moore LLP is serving as legal advisor to ZimVie. McDermott Will & Emery LLP is serving as legal advisor to H.I.G. Capital.