DEFA14A: ZimVie Completes Sale of Spine Business to H.I.G. Capital for $375 Million, Focuses on Dental Market

ZimVie Inc. finalizes the sale of its Spine business to H.I.G. Capital for $375 million, pivoting to concentrate on its dental market operations.

Summary

• ZimVie Inc. has completed the sale of its Spine business to an affiliate of H.I.G. Capital for a total consideration of $375 million.
• The consideration includes $315 million in cash and a $60 million promissory note.
• The promissory note will accrue interest at 10% per annum, compounded semi-annually, payable in kind, with a maturity no later than five and a half years from April 1, 2024.
• ZimVie expects an annualized financial profile of $455+ million in Net Sales and a 15%+ adjusted EBITDA margin one year after the deal's closing.
• The company intends to use $275 million from the sale to pay down outstanding debt, leaving approximately $234 million in total debt and an estimated $66 million in cash as of April 2, 2024.
• ZimVie will now focus on its dental business, developing and delivering dental tooth replacement and restoration products.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company has completed a significant transaction, is reducing debt, and focusing on a core business. However, there are risks associated with achieving the expected financial benefits.

Positives

• The sale provides ZimVie with $375 million in capital to reduce debt and focus on its dental business.
• The company expects to achieve a strong financial profile with $455+ million in Net Sales and a 15%+ adjusted EBITDA margin within one year.
• Debt reduction of $275 million will improve ZimVie's financial stability.
• Focusing on the dental market allows ZimVie to invest in differentiated solutions for dental patients and providers.

Negatives

• The adjusted EBITDA margin is a non-GAAP financial measure, and a reconciliation to GAAP is not available without unreasonable efforts.
• The promissory note bears a 10% interest rate, which could represent a significant expense for H.I.G. Capital.

Risks

• ZimVie may be unable to achieve the expected operational, strategic, and financial benefits of the transaction.
• The forward-looking statements are subject to risks, uncertainties, and changes in circumstances that could cause actual outcomes and results to differ materially.
• The company's future GAAP results may be impacted by adjusting items that ZimVie cannot reasonably predict at this time.

Future Outlook

ZimVie expects to achieve an annualized financial profile of $455+ million in Net Sales and a 15%+ adjusted EBITDA margin one year following the close of the deal, focusing on its dental business.

Management Comments

• Vafa Jamali, President and Chief Executive Officer, expressed excitement for the future of the company as it continues to invest in differentiated solutions for Dental patients and providers.
• Vafa Jamali thanked the global Spine team members for their immense contributions.

Industry Context

The sale allows ZimVie to streamline its operations and focus on the dental market, which it identifies as its most attractive end market. This aligns with a trend of companies focusing on core competencies to drive growth and shareholder value.

Comparison to Industry Standards

• It's difficult to compare ZimVie's expected 15%+ adjusted EBITDA margin to industry standards without knowing the specific dental sub-segment they operate in.
• Companies like Align Technology (orthodontics) and Straumann (dental implants) often have higher margins, but they also operate in different segments.
• The $375 million sale price should be compared to other recent spine business divestitures to assess if ZimVie received fair value.

Stakeholder Impact

• Shareholders should benefit from the company's increased focus and improved financial stability.
• Employees in the dental business may see increased investment and growth opportunities.
• The impact on former Spine business employees will depend on H.I.G. Capital's plans for the acquired business.

Key Dates

Keywords

ZimVie, Spine Business, H.I.G. Capital, Dental Market, Sale, Divestiture, Net Sales, EBITDA, Debt Reduction, Promissory Note