USA —Zimvie has strategically decided to divest its spine business to H.I.G. Capital, a Miami-based investment firm, marking a significant shift in focus toward its dental business.
The deal, valued at US$375 million, comprises a cash payment of US$315 million and a US$60 million promissory note with a 10% annual interest rate.
The transaction, set to close in the first half of 2024, is expected to bolster Zimvie’s financial health, reduce debt, and enhance performance metrics.
This decision underscores a significant shift in Zimvie’s strategic focus, redirecting its attention toward strengthening its dental business.
With the transaction set to conclude in the first half of 2024, Zimvie anticipates an enhancement of its financial health, debt reduction, and improved performance metrics.
J.P. Morgan analyst Robbie Marcus lauds this move as “a step in the right direction for ZimVie,” enabling the company to concentrate on what is perceived as the more attractive of its two end markets while simultaneously bolstering its financial standing.
Zimvie’s decision to part ways with its spine, motion preservation, and EBI bone healing technologies aligns with its objective of creating a leaner and more focused entity, with a specific emphasis on excelling in the globally growing dental markets, according to Zimvie CEO Vafa Jamali.
The after-tax proceeds from the sale are earmarked to reduce Zimvie’s total debt, with expectations that the transaction will positively impact revenue growth, EBITDA margin, and cash flow conversion rates.
Following the announcement, Zimvie’s shares experienced an impressive nearly 44% surge, reaching US$16.11 during Monday morning trading.
J.P. Morgan’s Marcus supports the transaction, noting the perceived “limited synergies” between Zimvie’s dental and spine businesses.
The additional US$315 million in cash is expected to play a crucial role in reducing the company’s net debt.
As of September 30, Zimvie reported a total debt of US$515.5 million, underscoring the significance of the impending financial relief through the divestiture.
In the financial results for the nine months ending September 30, Zimvie reported that dental sales remained relatively flat year-over-year at US$344.1 million, while spine sales witnessed an 8.5% decline to US$308.7 million.
The board of Zimvie has approved the sale, slated to conclude in the first half of 2024, contingent on meeting closing conditions, including regulatory approvals.
The spine business has posed challenges for ZimVie, evident in its recent third-quarter earnings, which showed a net loss of US$5.1 million—a notable drop from the US$800,000 net income reported in the corresponding period the previous year.
ZimVie attributes this decline primarily to “lower net sales and higher cost of products sold in the spine products category.”
Earlier this year, in response to escalating net losses in the first quarter, Zimvie announced plans to implement a workforce reduction of approximately 5%, emphasizing the aim to enhance efficiency and profitability within its spine portfolio across all markets.