Zimmer Corporation

Topics: Takeover, Stock market, Weighted average cost of capital Pages: 36 (9022 words) Published: November 10, 2011
Objective of the study

The primary objective of the study is to gain practical insights of the business world. Case analysis truly fulfills this objective. It is one of the most general and applicable methods of analytical thinking, depending only on the division of a problem, decision or situation into a sufficient number of separate cases. The derived objectives of this particular case study of ‘Zimmer Holdings (A): Acquisition of Centerpulse, Switzerland’ are the following:

* To ascertain the business vicinity of Zimmer Holdings * To assess whether it should counter offer for Centerpulse * To evaluate whether it is worthwhile to consider a higher bid * To assess how the company would manage associated risks * To identify whether the offer will be perceived as hostile * To evaluate how would they make the merger work, given the cultural differences between US and Swiss companies * To determine the synergistic benefit

Scope of the study

This case study analysis has been prepared through extensive discussion of all the group members. This report covers the elements of Zimmer Holdings business and whether it should counter offer for Centerpulse Limitations of the study

The limitations of the study are defined by the extensity of the facts covered by the study and those that are left out. However, these limitations can be presented in the following lines:

* The main constrain of the study was insufficiency of information * Some assumptions are made based on judgment

This case study analysis is based on secondary data. The data analysis was conducted using following procedure:

* Qualitative Analysis

Industry analysis is conducted through porter’s five forces model and company analysis through SWOT analysis, country risk analysis through ICRG model. * Quantitative analysis

The data are analyzed using simple tools like ratio analysis, free cash flow to firm approach for valuation, and simulation analysis for measuring variability in valuation. For valuing real option, Black-Scholes-Merton model is used.

Company at a Glance|
Nature of Industry| Belongs to medical technology industry| Nature of Firm| Orthopedic devices firm|
Incorporated| February,2001
Listed| New York stock exchange|
Market Cap| $ 6 billion|
Principal Products| Knee joint system, hip joint system, trauma products| Top Managemnet| Ray Elliott-chairman, president and CEO, Sam Leno-Executive vice president and CFO| Zimmer Holdings is a leading orthopedic devices firm based in Warsaw, Indiana. The firm is contemplating to place a counter offer for a Swiss firm Centerpulse; a spin-off of Sulzer Corporation for which an UK based competitor Smith and Nephew Plc (S&N) has announced a takeover. According to Swiss corporate takeover law, any takeover announcement could be countered by a competitive bid within 40 days of the announcement. So Zimmer has only 40 days to assess all the aspects. Zimmer is also a spin -off of Bristol Myers, a pharmaceutical company which acquired Zimmer in 1972 and spun it on 2001. It is listed in New York stock exchange with a market capitalization of $ 6 billion. It has positioned itself as second in the global knee market, third in the global hip market and forth in the global trauma market. It has net earnings of $ 80.2 million and net assets of $ 979 million in the 1st quarter of 2003. Overall ,it is third in the industry. The following two pie chats shows Zimmers’s and other compititors market share in the knee and hip implant products.

Zimmer covets to acquire Centerpulse because the merge firm would be the number one pure play orthopedics company in the world. It would give the combined firm leading market position, technology and scale through which Zimmer can capitalize on the attractive growth in the industry.

On the other hand, Centerpulse has established a world wide...
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