ZimVie Announces Closing of Sale of Spine Business

Rhea-AI Summary

ZimVie Inc. completes the sale of its Spine business to H.I.G. Capital for $375 million, establishing a pure-play dental business. The deal includes $315 million in cash and a $60 million promissory note. The company aims for a $455+ million Net Sales and a 15%+ adjusted EBITDA margin one year post-deal closure.

Insights

Financial Analyst

The divestiture of ZimVie's Spine business for $375 million to H.I.G. Capital represents a strategic refocus on the company's core dental market. This move is significant as it not only generates a substantial cash infusion but also allows ZimVie to streamline operations and potentially enhance profitability. The deal's structure, including a $60 million promissory note at a 10% interest rate, suggests a favorable outcome for ZimVie, providing a steady income stream over the next five and a half years.

By directing $275 million towards debt reduction, ZimVie is improving its balance sheet, which could lead to better credit terms and reduced interest expenses. With a projected annualized financial profile of $455+ million in Net Sales and a 15%+ adjusted EBITDA margin, ZimVie appears to be positioning itself for sustainable growth. However, investors should be cautious about non-GAAP measures like adjusted EBITDA, as they can exclude significant expenses and may not fully reflect a company's financial health.

Debt Market Analyst

The immediate repayment of $275 million in outstanding debt highlights ZimVie's commitment to financial prudence post-sale. The remaining debt of approximately $234 million, against an estimated cash position of $66 million, suggests a more conservative leverage position for the company. This could be appealing to debt investors, as it indicates a lower risk profile and a potentially stronger ability to meet financial obligations.

However, the interest rate on the promissory note is notably higher than current market rates, which signals a potential risk premium associated with the transaction. Stakeholders should monitor the company's debt servicing capabilities, especially in the context of the high-interest promissory note, which could impact cash flows.

Mergers & Acquisitions Expert

The sale of the Spine business is a classic example of a company divesting a non-core asset to concentrate on areas with higher growth potential. This strategic move should allow ZimVie to allocate resources more effectively and potentially drive innovation within the dental sector. The divestiture could also make ZimVie a more focused and agile competitor in the market.

Investors should consider the implications of such strategic realignments, including the potential for short-term disruptions during the transition period. Additionally, the success of this strategy hinges on ZimVie's ability to capitalize on its dental business and deliver on its sales and EBITDA margin projections. It's also worth noting that such transactions can attract regulatory scrutiny and require a careful analysis of the terms to ensure compliance and fair valuation.

Completion of Sale to an Affiliate of H.I.G. Capital for $375 Million Establishes Pure-Play Dental Business

PALM BEACH GARDENS, Fla., April 01, 2024 (GLOBE NEWSWIRE) -- ZimVie Inc. (Nasdaq: ZIMV), a global life sciences leader in the dental market, today announced that it has closed the previously communicated sale of its Spine business to an affiliate of H.I.G. Capital for $375 million in total consideration, including $315 million in cash and a $60 million promissory note.

“The completion of the sale of our Spine business is the culmination of months of partnership with H.I.G. Capital and years of commitment from our global Spine team members; I would like to thank everyone for their immense contributions,” said Vafa Jamali, President and Chief Executive Officer. “I could not be more excited for the future of our company as we continue to invest in differentiated solutions for Dental patients and providers in our most attractive end markets, while optimizing our structure to deliver value for our shareholders.”

Terms of the Agreement

Under the terms of the agreement, ZimVie will receive $375 million in total consideration, comprised of $315 million in cash, subject to certain customary adjustments as set forth in the agreement, and $60 million in the form of a promissory note that will accrue interest at a rate of 10% per annum, compounded semi-annually, payable in kind, subject to a maturity no later than five and a half years from today’s closing.

Outlook for ZimVie

As previously communicated, ZimVie expects to achieve an annualized financial profile of $455+ million in Net Sales, and a 15%+ adjusted EBITDA margin⁽¹⁾ one year following the close of the deal. ZimVie intends to immediately pay down $275 million of outstanding debt, leaving total debt of approximately $234 million, and estimated cash of approximately $66 million as of April 2, 2024.

^{(1) This is a non-GAAP financial measure for which a reconciliation to the most directly comparable GAAP financial measure is not available without unreasonable efforts. Refer to the “Forward-Looking Non-GAAP Financial Measures” section of this press release, which identifies the information that is unavailable without unreasonable efforts and provides additional information.}

About ZimVie

ZimVie is a global life sciences leader in the dental market that develops, manufactures, and delivers a comprehensive portfolio of products and solutions designed to support dental tooth replacement and restoration procedures. From its headquarters in Palm Beach Gardens, Florida, and additional facilities around the globe, ZimVie works to improve smiles, function, and confidence in daily life by offering comprehensive tooth replacement solutions, including trusted dental implants, biomaterials, and digital workflow solutions. As a worldwide leader in this space, ZimVie is committed to advancing clinical science and technology foundational to restoring daily life. For more information about ZimVie, please visit us at www.ZimVie.com. Follow @ZimVie on Twitter, Facebook, LinkedIn, or Instagram.

Forward-Looking Non-GAAP Financial Measures

This press release also includes certain forward-looking non-GAAP financial measures including adjusted EBITDA margin for the period ending one year after the closing of the sale of our spine business. We calculate forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. We have not provided quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because the GAAP measures cannot be reliably estimated and the reconciliations cannot be performed without unreasonable effort due to their dependence on future uncertainties, such as the timing of certain transactions, and adjusting items that the Company cannot reasonably predict at this time but which may have a material impact on our future GAAP results.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning ZimVie’s expectations, plans, prospects and product and service offerings, including expected benefits, opportunities, and other prospects as a result of the transaction. Such statements are based upon the current beliefs, expectations, and assumptions of management and are subject to significant risks, uncertainties, and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements. These risks, uncertainties and changes in circumstances include, but are not limited to, the possibility that ZimVie may be unable to achieve the expected operational, strategic, and financial benefits of the transaction. For a list and description of other such risks, uncertainties, and changes in circumstances, see ZimVie’s periodic reports filed with the U.S. Securities and Exchange Commission (SEC). These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in ZimVie’s filings with the SEC. Forward-looking statements speak only as of the date they are made, and ZimVie disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers of this press release are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary note is applicable to all forward-looking statements contained in this press release.

Media Contact Information:

ZimVie
Allison Johnson • Allison.Johnson@ZimVie.com
(774) 266-8046

ZimVie
Grace Flowers • Grace.Flowers@ZimVie.com
(561) 319-6130

Investor Contact Information:

Gilmartin Group LLC
Marissa Bych • Marissa@gilmartinir.com

 

FAQ

What was the total consideration for the sale of ZimVie's Spine business to H.I.G. Capital?

The total consideration for the sale was $375 million, including $315 million in cash and a $60 million promissory note.

What are ZimVie's financial targets post-deal closure?

ZimVie aims for an annualized financial profile of $455+ million in Net Sales and a 15%+ adjusted EBITDA margin one year following the close of the deal.

How much debt does ZimVie plan to pay down immediately after the sale?

ZimVie intends to immediately pay down $275 million of outstanding debt, leaving total debt of approximately $234 million.