Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC conditionally approves combination of medical device makers, (Jun 24, 2015)

By Jeffrey May, J.D.

Zimmer Holdings, Inc. completed the acquisition of its smaller rival, Biomet Inc., today after receiving conditional approval from the FTC. The deal to create Zimmer Biomet Holdings, Inc. is valued at approximately $14 billion. The companies resolved FTC concerns that the combination, announced more than one year ago, might harm competition because Zimmer and Biomet are two of only three substantial competitors in the U.S. markets for unicondylar knee implants and total elbow implants, and two of only four significant competitors in the U.S. market for bone cement (In the Matter of Zimmer Holdings, Inc., FTC File No. 141-0144).

In its complaint, the FTC alleged that, without modifications to the transaction, the combined firm would unilaterally exercise market power in the markets for these three products, which are used primarily by orthopedic surgeons. In the market for unicondylar knee implants, the FTC estimated that the combined firm's market share would be at least 67 percent. Unicondylar knee implants are medical devices that replace damaged bone and cartilage in only one of the knee’s three condyles. The agency also contended that the deal would have made the market for total elbow implants “highly concentrated.” Total elbow implants replace the elbow joint with a metal hinge.

In addition, the FTC alleged that the proposed acquisition, if not modified, would substantially increase concentration in the bone cement market, where Zimmer has a market share of approximately 30 percent and Biomet has a market share of approximately 10 percent. Bone cement is used to affix implants to bones, including the vast majority of knee and elbow implants.

Proposed consent order. Under the terms of the proposed FTC consent order, the merged company will divest Zimmer’s U.S. Unicompartmental High Flex Knee System (ZUK) business to London-based Smith & Nephew, Inc. and Biomet’s U.S. Discovery Total Elbow implant and Cobalt Bone Cement rights and assets to Vista, California-based DJO Global, Inc. Last month, Zimmer disclosed that it had reached deals with the potential buyers of these assets. The FTC settlement follows clearance from the European Commission and the Japan Fair Trade Commission.

Attorneys: Daniel Zach and Michael R. Moiseyev for FTC. George L. Paul (White & Case LLP) for Zimmer Holdings, Inc. Steven A. Newborn (Weil, Gotshal & Manges LLP) for Biomet, Inc.

Companies: Zimmer Holdings, Inc.; Biomet, Inc.; Zimmer Biomet Holdings, Inc.; Smith & Nephew, Inc.; DJO Global, Inc.

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