According to Bloomberg, Korea dental implant maker Osstem Implant (Chinese: Ottotech) is in advanced talks to acquire United States peer company ZimVie (Chinese: Everything). Currently, Osstem has submitted a final offer to ZimVie and arranged financing for a potential transaction. While negotiations have progressed, there is still a possibility that they will break down, and other bidders may emerge, the people said.
ZimVie shares rose more than 12% to $21.31 per share on the news. Currently, it has a market capitalization of $582 million.
The dramatic change has continued over the past three years:
- In March 2022, orthopedic medical device giant Zimmer Bangmei spun off its spine and dental business and went public, and ZimVie was born.
- In December 2023, ZimVie sold its spine business to become a pure-play dental company. The sale will be officially completed in April 2024.
- In June 2024, foreign media reported that after receiving the acquisition offer, ZimVie said that he was considering "selling himself".
If it accepts the "acquisition", ZimVie will only take more than two years from its birth to its finality. What's going on here?
▲The stock price trend of ZimVie since its listing (listing is the peak)
01. Why are you always "dismantling" and "selling"?
Back to the source, why did Zimmer Bonmei divest its spine and dental business back then?
▲Zimmer Bangmei's 2021 annual report data
ZimVie was officially listed independently in March 2022, let's take a look at the previous performance:
If you only look at Zimmer Bonmei's 2021 annual report, the Spine & Dental business performed quite well, with revenue of $1.009 billion, +13% year-on-year.
However, if we compare the overall data from 2017 to 2021, we will find that the revenue of the spine & dental business not only accounts for the smallest proportion of the four major businesses of Zimmer Bangmei (excluding other businesses), but also continues to decline (except for 2021). Even though the revenue of the Spine & Dental business increased in 2021 due to the slowdown of the epidemic and the rebound of surgical volumes, the revenue of $1.009 billion was still lower than the $1.022 billion in 2019.
Obviously, in terms of revenue performance alone, the Spine & Dental business is a drag.
Correspondingly, in 2021, the dental track is hot.
- On the one hand, top dental manufacturers Dentsply, Sirona, Align Technology, Envista, Straumann, and 3M have seen annual revenue growth of at least 25%, and Align Technology's growth has even reached 60%.
- On the other hand, the investment and financing of the dental market is hot. In the Chinese market alone, statistics show that in 2021, there will be nearly 60 investment, financing and mergers and acquisitions in the dental industry, of which more than 20 cases will exceed 100 million yuan in a single transaction.
As a result, Zimmer Bonmei quickly spun off its spine and dental business into ZimVie: "This is an important step in shifting our portfolio to higher growth markets, where we have a clear path to leadership and the right to win. ”
According to the relevant documents of the spin-off, Zimmer Bonmei retains less than 20% of ZimVie's shares.
On March 1, 2022, ZimVie went public, and from day one, its stock price was in free fall.
According to its published documents, ZimVie ranks 5th in the global dental market and 6th in the global spine market. No matter which way you look at it, it is a good seedling that is the world's leading.
But ZimVie had a fatal "birth defect" - he was saddled with huge debts.
Unlike some spin-offs, ZimVie took on a portion of the debt as part of the spin-off from Zimmer Bonmei, which borrowed $595 million in term loans and paid $540 million as a special dividend to Zimmer Bonmei. In Q1 2022, ZimVie had a cash balance of $104 million and net debt of $452 million.
ZimVie, which is desperate to repay its debts, needs a good revenue performance.
For its first year of independence, ZimVie expects revenue of $1 billion, which is about the same as when it was under Zimmer Bonmei. But he was "slapped in the face" by reality. According to the 2022 financial report, ZimVie's overall revenue was $909.5 million, a year-on-year increase of -9.8%, with a net loss of $63.9 million.
Its revenue performance in Q4 2022 was particularly poor, falling short of Wall Street expectations. The overall revenue was US$228.2 million, a year-on-year increase of -12.4%, and the two major business segments both declined - dental revenue was US$115.8 million, a year-on-year increase of -7.6%; Spine revenue was $112.3 million, -16.9% year-over-year.
In addition to macroeconomic pressures, ZimVie pointed to "volume purchasing" as the biggest contributor to poor performance. Based on this, in March 2023, ZimVie directly announced that it plans to completely withdraw its spine business from the Chinese market due to the impact of spine procurement. In addition, under the centralized procurement of dental implants, its dental business in China also needs to be further evaluated.
But even after withdrawing from the Chinese market, ZimVie's spine business eventually came to the fate of being "sold".
In December 2023, ZimVie announced the sale of its spine business to investment firm H.I.G. Capital。 That afternoon, ZimVie's shares soared more than 50% to $17.05 per share. The total transaction value of the Spine business was $375 million, consisting of $315 million in cash and $60 million in promissory notes, which will accrue interest at the rate of 10% per annum, compounded semi-annually, and payable in kind no later than five and a half years after closing. According to the 2023 financial report, ZimVie's revenue was $460 million, and the net loss further widened to $390 million. The pressure is enormous.
Fortunately, on April 1, 2024, ZimVie, which completed the sale of its spine business, not only officially transformed from a "leader in the dental and spine market" to a pure dental company, but also had the ability to repay part of its debts.
ZimVie said in the announcement: ZimVie intends to immediately repay $275 million of outstanding debt, with total debt of approximately $234 million and estimated cash of approximately $66 million as of April 2, 2024. At the same time, it expects annual net sales to reach more than $455 million and adjusted EBITDA margin to reach more than 15% one year after closing.
But all this expectation may disappear with ZimVie's acceptance of the "acquisition".
02. How high can I get a quote?
It's hard to say exactly how many offers ZimVie will get.
Although the market capitalization of ZimVie has gradually reached US$582 million after a recent series of rises, the investment and financing activities of the oral medical industry in the global market have shown an active and prudent state, and the related investment and financing are mainly concentrated in the fields of AI and automation, integrated platforms and services, product development and market expansion, pediatric oral treatment, and international market expansion.
For example, Overjet closed a $53 million Series C funding round to improve AI diagnostic standards; Zuub received $9 million in Series A funding to develop dental automation solutions; India's makeO secures $16 million in financing to expand the market for transparent orthodontics...
Judging from the trend of investment and financing, Korea's Osstem proposed acquisition may be to strengthen the pipeline while further expanding the international market.
Founded in 1997, Osstem is the world's leading manufacturer of dental implant materials, as well as selling dental equipment and pharmaceutical products.
In 2023, private equity firms MBK Partners and Unison Capital took Osstem private, followed by Mubadala Investment investing in it.
MBK Partners, the majority shareholder, manages more than $30 billion in assets, mainly in China, Japan and Korea. At the end of 2022, MBK Partners acquired Korea 3D dental scanner manufacturer Medit for $2 billion.
So, if Osstem successfully acquires ZimVie, will ZimVie remain listed or will it be delisted? Medical trends will continue to be monitored.