Zimmer Biomet's Strategic Acquisition of Paragon 28: A Path to Higher Growth and Market Penetration

Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH), a global medical technology leader, has announced a definitive agreement to acquire all outstanding shares of common stock of Paragon 28, Inc. (NYSE: FNA), a leading medical device company focused exclusively on the foot and ankle orthopedic segment. The acquisition, valued at approximately $1.1 billion in equity value and $1.2 billion in enterprise value, is expected to immediately accelerate Zimmer Biomet's revenue growth and be accretive to adjusted earnings per share within 24 months of deal close. The transaction is subject to regulatory approvals, approval by Paragon 28 stockholders, and other customary closing conditions, with an anticipated close in the first half of 2025.

Paragon 28, established in 2010, has an extensive suite of surgical offerings and product systems spanning all major foot and ankle segments, including fracture and trauma, deformity correction, and joint replacement. The company's commitment to product innovation and singular focus on the foot and ankle segment has positioned it as an industry leader, bringing innovative solutions to address areas of unmet need. By acquiring Paragon 28, Zimmer Biomet aims to strengthen and expand its foot and ankle offerings, complement its global footprint, and accelerate growth in the high-single-digit growing foot and ankle industry.

The acquisition of Paragon 28 aligns with Zimmer Biomet's long-term growth strategy, as it allows the company to diversify its portfolio outside of core orthopedics and tap into the high-growth foot and ankle segment. The transaction creates cross-selling opportunities in the rapidly growing ambulatory surgery center (ASC) space, as Paragon 28's broad and innovative foot and ankle portfolio, robust product pipeline, and dedicated sales force combine with Zimmer Biomet's global reach and capabilities. This strategic move is expected to uniquely position the company to address the unmet patient needs of this highly complex anatomy.

Zimmer Biomet plans to fund the proposed transaction through a combination of cash on the balance sheet and other available debt financing sources. The company expects to maintain a strong balance sheet and continue to support its stated capital allocation priorities. The acquisition is expected to be approximately 3% dilutive to adjusted earnings per share in 2025, about 1% dilutive to 2026 adjusted earnings per share, and accretive to adjusted earnings per share within 24 months of deal close.

In conclusion, Zimmer Biomet's acquisition of Paragon 28 is a strategic move that positions the company for higher growth and market penetration in the foot and ankle orthopedic segment. By leveraging Paragon 28's innovative solutions and complementary product portfolio, Zimmer Biomet can offer a more comprehensive range of products, expand its global reach, and drive innovation to better serve patients and healthcare providers. As the transaction progresses, investors should closely monitor the integration process and the potential synergies that may arise from this strategic combination.