EU to extend Zimmer, Biomet probe, clear Eli Lilly, Novartis deal: sources

October 2
11:40 PM 2014

EU antitrust regulators will open an extensive probe into Zimmer's (ZMH.N) $13.4 billion bid for Biomet, concerned that the creation of the world's second-largest orthopedic products group may hurt competition, three people familiar with the matter said on Thursday.

In contrast, U.S. drugmaker Eli Lilly's (LLY.N) proposed $5.4 billion takeover of Swiss peer Novartis's (NOVN.VX) animal health business triggered no such worries and will be cleared unconditionally, the sources said.

The two deals are among several announced in recent months in the healthcare sector, with firms seeking to gain scale or specialize in certain disease areas.

The European Commission has been reviewing the deal between Zimmer and rival orthopedic products maker Biomet [LVBHAB.UL] since August and has set an Oct. 3 deadline for its decision, although this could be extended by 90 working days if it opens a broad investigation.

Zimmer may be forced to offer concessions to remove regulatory concerns unless it can convince the Commission that the deal would not reduce competition.

Larry Biegelsen, an analyst at Wells Fargo Securities in New York, said Zimmer was likely to offer to make divestments, with products for fixing knees and shoulders two potential areas for spin-offs, since the combined firm would have a high market share in these fields.

An in-depth probe would be likely to extend into January 2015, he said, but was unlikely to sink the deal, noting EU regulators launched a similar investigation into Johnson & Johnson's (JNJ.N) merger with Synthes in November 2011 and that deal was cleared in April 2012.

J&J agreed to divest its trauma business to get that transaction approved.

The Biomet acquisition would make Zimmer the second-largest seller of orthopedics products behind J&J and boost its presence in the fast-growing sports medicine sector.

Eli Lilly is buying the Novartis unit to strengthen and diversify its Elanco unit. The Commission is scheduled to decide on that deal by Oct. 3.

Commission spokesman Antoine Colombani and Novartis declined to comment.

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