Zimmer Biomet is spinning-off its spine and dental businesses, a move that could unlock significant shareholder value.
Zimmer Biomet moved ahead with its ongoing transformation on Friday by announcing its intention to spin off its spine and dental businesses.
The spin-off will create a new publicly traded company and will allow Warsaw, IN-based Zimmer Biomet to focus on high-growth segments of the orthopedics market, including knees, hips, S.E.T. (sports medicine, extremities, and trauma), and CMFT (craniomaxillofacial and thoracic). The spin-off transaction is expected to close around mid-2022.
CEO Bryan Hanson said the planned spin-off is part of the third phase of the company’s transformation. Hanson took the helm at Zimmer Biomet in December 2017 and was tasked with righting the ship. The company had struggled with quality control and supply chain problems for about a year at that point, and those challenges had created investor frustration that ultimately led to former CEO David Dvorak’s resignation in July 2017. In October 2018, Hanson told investors that Zimmer Biomet would have to reduce the size of its portfolio in order to simplify the supply chain and improve service levels to customers. MD+DI editors recognized Zimmer Biomet as the medtech company of the year in 2019 because of its impressive turnaround efforts.
“You’ve heard me talk about our three phases of transformation,” Hanson said during the company’s earnings call Friday morning, according to SeekingAlpha’s transcript. “First was the hearts and minds and the execution challenges that we had in the very beginning. That’s what we talked about a lot in the beginning. The second phase of this was really doing a more robust, longer-term strategy, making sure that we brought innovation to the market and getting our execution straight. We’re clearly well into that phase. And third is our portfolio transformation. And that’s the goal of active portfolio management to change the complexion of the organization, so that we can have better goal of sustaining the mid-single-digit growth.”
The announcement prompted Needham & Co. to reiterate its buy rating on the stock.
Image Credit: Zimmer Biomet