DEFA14A: Zimmer Biomet to Acquire Paragon 28 in $1.3 Billion Deal

Zimmer Biomet will acquire Paragon 28 for $13.00 per share in cash plus a contingent value right (CVR) payment, potentially reaching a total enterprise value of approximately $1.3 billion.

Summary

• Paragon 28, Inc. has entered into a definitive agreement to be acquired by Zimmer, Inc., a wholly-owned subsidiary of Zimmer Biomet Holdings, Inc.
• Under the terms of the agreement, Zimmer will acquire Paragon 28 for $13.00 per share in cash, plus one contingent value right (CVR) per share.
• The CVR entitles shareholders to an additional cash payment of up to $1.00 per CVR if Paragon 28 achieves net revenue exceeding $346 million during 2026, with a maximum payment if net revenue reaches $361 million.
• The transaction is subject to customary closing conditions, including stockholder approval and regulatory approvals, and is expected to close by November 28, 2025, with a possible extension to January 28, 2026.
• Key Paragon 28 stockholder Albert DaCosta has entered into a voting agreement to support the merger.
• Upon completion of the merger, Paragon 28's stock will be delisted from the New York Stock Exchange.

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The acquisition provides a good outcome for Paragon 28 shareholders, but the CVR adds some uncertainty. The deal is strategically sound for Zimmer Biomet.

Positives

• Paragon 28 stockholders will receive $13.00 per share in cash.
• Stockholders have the potential to receive an additional $1.00 per share through the CVR.
• The merger provides liquidity to Paragon 28 stockholders.
• Zimmer Biomet's resources and expertise could accelerate Paragon 28's growth.

Negatives

• The CVR payment is contingent on Paragon 28 achieving specific revenue targets in 2026, which may not be met.
• The deal is subject to regulatory approvals and other closing conditions, which could delay or prevent the transaction from closing.
• Paragon 28 will be obligated to pay Parent a termination fee of $40 million under certain circumstances.

Risks

• Failure to obtain stockholder approval could prevent the merger.
• Regulatory hurdles could delay or block the transaction.
• A material adverse effect on Paragon 28 could allow Zimmer Biomet to terminate the agreement.
• The revenue targets for the CVR payment may not be achieved.
• Competing offers for Paragon 28 could emerge.

Future Outlook

The document contains forward-looking statements regarding the potential benefits of the proposed transaction, anticipated accretion and growth rates, and the possibility of achieving the revenue milestone necessary for the CVR payment. However, these statements are subject to risks and uncertainties, and there is no guarantee that the milestone will be achieved or that the transaction will close.

Management Comments

• Albert DaCosta, Paragon 28's Chairman, President and CEO, has agreed to vote in favor of the adoption and approval of the Merger Agreement.

Industry Context

This acquisition reflects ongoing consolidation trends in the medical device industry, with larger players seeking to expand their product portfolios and market share through strategic acquisitions of smaller, innovative companies.

Comparison to Industry Standards

• The acquisition multiple and CVR structure are comparable to recent deals in the medical device space, such as Stryker's acquisition of Wright Medical Group N.V. and Medtronic's acquisition of Mazor Robotics.
• The CVR structure incentivizes Zimmer Biomet to invest in and grow Paragon 28's business to achieve the revenue targets.
• The $40 million termination fee is standard for deals of this size.

Stakeholder Impact

• Shareholders of Paragon 28 will receive cash and a potential CVR payment.
• Employees of Paragon 28 will likely become part of Zimmer Biomet.
• Customers of Paragon 28 will have access to a broader range of products and services.
• Suppliers and partners of Paragon 28 may see changes in their relationships with the company.

Next Steps

• Paragon 28 will file a proxy statement with the SEC and mail it to its stockholders.
• Paragon 28 will hold a stockholder meeting to vote on the merger agreement.
• The parties will seek regulatory approvals.
• The transaction is expected to close by November 28, 2025, or potentially January 28, 2026.

Key Dates

Keywords

Paragon 28, Zimmer Biomet, Merger, Acquisition, Contingent Value Right, Stockholder Approval, Regulatory Approvals, Delisting, Foot and Ankle