Paragon 28 concludes merger with Zimmer Biomet subsidiary

ENGLEWOOD, CO - Paragon 28, Inc., a company specializing in surgical and medical instruments with a market capitalization of $1.1 billion, has completed a significant merger with Gazelle Merger Sub I, Inc., a subsidiary of Zimmer Biomet Holdings (NYSE:ZBH), Inc., according to an 8-K filing with the U.S. Securities and Exchange Commission. The transaction, which was finalized on Monday, transforms Paragon 28 into a wholly owned subsidiary of Zimmer Biomet. The deal comes after Paragon 28’s impressive 145% stock price surge over the past six months, though InvestingPro analysis suggests the stock was trading above its Fair Value at the time of the merger.

As part of the merger agreement, each share of Paragon 28’s common stock has been converted into the right to receive $13.00 in cash and one contingent value right (CVR), which could result in additional cash payment based on future revenue milestones. The CVRs are non-transferable, except under specific circumstances, and do not represent any equity interest in the involved companies. Prior to the merger, Paragon 28 demonstrated strong financial health with a current ratio of 3.51, indicating robust liquidity to meet short-term obligations.

In conjunction with the merger, Paragon 28 has settled and terminated all outstanding obligations under its previous loan and credit agreements. The company had entered into these financial arrangements with Zions Bancorporation (NASDAQ:ZION) and Ares Capital Corporation in past years. InvestingPro data shows the company had been operating with a moderate debt-to-equity ratio of 0.86, while maintaining steady revenue growth of 18.4% in the last twelve months.

The merger’s completion has also prompted the delisting of Paragon 28’s common stock from the New York Stock Exchange, with trading halted as of the merger’s closing date. The company will also seek to terminate its registration and suspend its reporting obligations under the Securities Exchange Act.

The board of directors and executive officers of Paragon 28 have undergone changes as a result of the merger. The previous board members have ceased their roles, and new officers have been appointed to lead the company as it integrates into Zimmer Biomet’s operations.

This strategic move is expected to enhance Zimmer Biomet’s portfolio in the medical devices sector, although there is no guarantee that the revenue milestones for CVR payments will be met. The merger is based on an agreement initially announced on January 29, 2025, and is detailed in the SEC filing dated April 21, 2025. For deeper insights into similar medical device companies and their valuations, InvestingPro subscribers can access comprehensive financial analysis and exclusive Pro Research Reports covering over 1,400 US stocks.

In other recent news, Paragon 28 announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, marking a significant step in its merger with Zimmer Biomet Holdings. The acquisition, valued at approximately $1.2 billion, offers Paragon 28 shareholders $13 per share, with an additional contingent value right of $1 per share if specific revenue milestones are met. Analysts from Stephens and Needham have downgraded Paragon 28’s stock, with Stephens lowering the rating to Equal Weight and Needham to Hold, following the merger announcement. The deal’s structure, with its upfront payment and potential additional earnings, reflects the anticipated financial benefits for Paragon 28’s shareholders. Despite the deal’s valuation being lower than some expectations, analysts believe the likelihood of a higher bid is improbable. JMP Securities highlighted Paragon 28’s recent financial growth, including positive EBITDA in the third quarter of 2024, as factors enhancing its acquisition appeal. The merger is anticipated to be completed in the first half of 2025, subject to customary closing conditions. Both companies’ boards have unanimously approved the transaction, and no significant antitrust issues are expected to arise.

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