Biomet Agrees to $10.9 Billion Buyout

Biomet Inc., a maker of hip and knee replacement products, agreed Monday to be acquired by a private equity consortium for about $10.9 billion in cash.

The buyers include Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts and the Texas Pacific Group, along with one of Biomet's founders, Dane A. Miller.

Shareholders are being offered $44 per share, a 27 percent premium to Biomet's price on April 3, the trading day before news surfaced that the company was a takeover target. Biomet started looking for a buyer with the help of Morgan Stanley Inc. on April 6.

The buyers said they will use a combination of their own cash and borrowed funds from Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS) to finance the takeover.

The board of Warsaw-based Biomet voted in favor of the transaction, which is subject to shareholder approval and antitrust clearance.

The investor group said in a statement that it would work with Biomet's management and sales force to help accelerate growth and profitability.

"We will work in close partnership with Biomet's excellent management while harnessing the extensive resources of our consortium, to build on Biomet's long heritage of success," the group said.

Biomet said the transaction is expected to be complete by Oct. 31, and the company's stock will be delisted from the Nasdaq Stock Market.

Becoming a private company with the backing of equity partners will put Biomet in a stronger position, said Daniel P. Hann, interim president and chief executive of the company, which has about 6,300 employees.

"This transaction offers shareholders the ability to realize substantial value from their investments in Biomet and provides important benefits to our customers, team members and other stakeholders," Hann said in a statement.

Last week, UBS analyst Kristen M. Stewart wrote in a report that a private equity buyout wouldn't be justified at more than $43 per share.

Biomet shares fell 69 cents, or 1.6 percent, to $41.31 in morning trading on the Nasdaq.

Biomet, which was established in 1977 in Warsaw, has about 1,350 workers in Indiana. Warsaw, a city of 12,000 people some 40 miles west of Fort Wayne, also is home to orthopedics giants DePuy Orthopaedics Inc. and Zimmer Holdings Inc.

Separately, Biomet said a special committee has found that a substantial number of stock option grants made from 1996 to 2006 issued on different dates than their granting dates to take advantage of a lower stock price "were not well documented."

The practice, known as "backdating," is not illegal, but it must be properly accounted for.

Senior executives were aware of the practice, according to Biomet, but were not necessarily aware of the legal ramifications.

Although the accounting errors could have a material effect on past financial results, the company said it has yet to determine their full effect.

As a result of the investigation, Biomet said it will delay releasing its second-quarter earnings, but preliminary results showed that sales increased 5 percent to $520.3 million for the quarter ended Nov. 30. Reconstructive device sales rose 9 percent worldwide to $368.1 million.

Analysts surveyed by Thomson Financial estimated sales of $526.8 million for the second quarter.