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Sweetened Biomet offer may seal deal

A private equity consortium raises its bid to $11.4 billion after a top shareholder balked.

June 08, 2007|From the Associated Press

INDIANAPOLIS — An improved offer to buy Biomet Inc. may provide enough incentive to seal a deal initially rejected by a major shareholder and a couple of shareholder advisory firms.

The maker of orthopedic products announced Thursday that a private equity consortium had increased its bid by 4.5% to $11.4 billion. The new offer is for $46 a share, up from $44 a share.

The consortium includes Biomet founder and former Chief Executive Dane A. Miller and affiliates of Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG.

Shares of the Warsaw, Ind., company rose $1.36, or 3.1%, to $45.56.

Biomet urged shareholders to approve the new deal and said the latest offer represented a premium of 32% over the closing price of its shares on April 3, 2006, when speculation surfaced that the company was examining its strategic alternatives.

The consortium said the new offer was "the absolute limit" of what it could pay for Biomet.

At least 75% of Biomet common shares must be tendered to complete the deal. Shareholders were supposed to vote today on the previous offer, but that vote was canceled after the new proposal was announced.

Two companies that advise shareholders on voting matters -- Institutional Shareholder Services and Proxy Governance Inc. -- had recommended against the original deal.

P. Schoenfeld Asset Management of New York announced earlier this week that it would have opposed that deal because the offer was too low. The firm holds a 1.9% stake in Biomet. Portfolio manager Doug Polley declined to comment Thursday on the latest offer.

"We've seen this with a number of private equity deals in recent months," said Shirley Westcott, Proxy Governance's managing director of policy. "If there's opposition expressed by a number of investors, they end up throwing more money on the table."

Analysts say the additional money and a change in the deal's format will help.

The tender-offer format of the new deal should spur a higher participation rate among shareholders than the other proposal, which was a statutory merger to be approved by shareholders, said Chris Young, director of merger and acquisition research for Institutional Shareholder Services.

The new offer of $46 a share sits at the upper end of what would be a fair price for the company, said Greg Simpson, an analyst with St. Louis-based Stifel Nicolaus & Co.

"I didn't have a problem with $44, so should Biomet shareholders be happy with $46? They should be thrilled to tears, quite frankly," Simpson said.

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