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Investing.com -- Zimmer Biomet Holdings (NYSE:ZBH), Inc. has announced Tuesday evening plans to acquire Paragon 28, Inc. (Paragon 28), a move that Moody’s (NYSE:MCO) Ratings (Moody’s) predicts will increase leverage, support future growth, and diversify the company’s business. The ratings agency stated that this development will not affect Zimmer’s ratings, including its Baa2 senior unsecured notes ratings. Zimmer’s outlook remains stable.
The transaction, valued at an equity value of about $1.1 billion and an enterprise value of roughly $1.2 billion, will be financed through a combination of cash on hand and other available debt funding sources. Moody’s estimates that leverage will rise from approximately 2.9x to 3.4x pro forma Last Twelve Months (LTM) as of September 30, 2024. However, this figure is expected to fall below 3.25x by the end of 2025, as Zimmer reaps the benefits of synergies and continues to expand due to its recent product launches.
The acquisition of Paragon 28 will allow Zimmer to deepen its footprint in the foot and ankle orthopedic segment. Paragon 28 boasts a wide range of surgical offerings and product systems that cover all major foot and ankle segments, including fracture and trauma, deformity correction, and joint replacement. This expanded portfolio will enable Zimmer to reduce its dependence on the knee and hip space, which currently accounts for about 41% and 26% of its revenue, respectively, as of September 30, 2024.
The acquisition is still subject to regulatory review and approval from Paragon 28’s shareholders. Zimmer anticipates that the transaction will be completed in the first half of 2025.
Zimmer Biomet Holdings, Inc., headquartered in Warsaw, Indiana, is a leading global company specializing in musculoskeletal healthcare. The company focuses on the development of orthopedic implants for hips and knees, as well as craniomaxillofacial and trauma care. As of LTM September 30, 2024, Zimmer reported revenues of approximately $7.6 billion.
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