Zimmer Closes China Acquisition
BY JOHN MCCORMICK, DECEMBER 21, 2010
This morning Zimmer announced that it has finalized its acquisition of China-based Beijing Montagne, a mainland company that develops large joint implants and instruments. Announced in July, the deal took six months to close, as expected.
The acquisition makes a lot of sense for Zimmer. Although the Chinese orthopedic industry is white hot, local companies are fragmented and mainly offer trauma and spine. Two of the high-flyers, Trauson and and Kanghui, have recently had stellar IPOs, but when you check under the hood their implants are fundamentally non-differentiated fusion devices. Functioning local large joint manufacturers like Montagne, on the other hand, are rare, as mainland manufacturers have not yet been able to replicate motion-preserving implants. One thing we all can be sure of... in the coming years, they will.
Zimmer's management has been making the case that the $1 billion Chinese orthopedic market stands to double in the next 3 to 4 years, and we don't dispute it. The only qualifier is that the $1 billion market size estimate is end-user price x volume, where external distributors take a sizable cut.
Terms were not disclosed, but the rumor mill at this year's Chinese Orthopedic Association meeting in Chengdu pegged the purchase price in the US$40 - US$60 million neighborhood.
