Zimmer Biomet to Acquire Paragon 28 for $1.1 Billion

M&A Announcement: Zimmer Biomet is set to acquire Paragon 28 for $1.1 billion. The deal includes a contingent value right linked to future revenue growth, which may influence stock prices positively due to anticipated revenue enhancement.

Date: 29-01-2025

AI Rating: 6

Transaction Overview
Zimmer Biomet is acquiring all outstanding shares of Paragon 28 for an upfront payment of $13.00 per share, resulting in an equity value of roughly $1.1 billion. This acquisition is also expected to bring a contingent value right, resulting in potential additional cash based on revenue milestones.

Revenue Growth
Zimmer Biomet expects this acquisition will accelerate their revenue growth. Paragon 28 has projected a net revenue range for 2024 of $255.9 to $256.2 million, representing an 18.2% to 18.4% growth from the previous year. This positive revenue growth outlook may bolster Zimmer Biomet's revenue streams post-acquisition.

Earnings Per Share (EPS)
The acquisition is projected to be approximately 3% dilutive to adjusted earnings per share (EPS) in 2025 and about 1% dilutive in 2026. However, it is expected to become accretive to EPS within 24 months following the transaction's closure. This potential for EPS improvement may appeal to investors looking for long-term growth.

Funding Strategy
Zimmer Biomet plans to finance the acquisition using a mix of cash on hand and debt financing, which indicates they are confident in managing their capital structure efficiently. However, the potential dilutive effect on EPS should be monitored by investors.

Conclusion
The acquisition of Paragon 28 by Zimmer Biomet signals ambition for growth and could positively influence stock performance over time, depending on the revenue achievements against the set milestones.

Stocks: ZBH