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At a glance
Biomet Inc.
Business: The company designs, manufactures and markets orthopedic devices and surgical instruments, with about half of sales related to hip and knee products.
Headquarters: Warsaw
Locations: More than 50, supporting distribution in more than 90 countries
Founded: 1977
Employees: Almost 9,000
Ownership: Private equity firms The Blackstone Group; Goldman, Sachs & Co.; Kohlberg Kravis Roberts & Co.; and TPG
Fiscal 2013 net sales: More than $3 billion
Proposed stock symbol: BMET

Biomet begins trek toward IPO

Highly leveraged company comes with risks

Biomet Inc. could soon be publicly traded … again.

LVB Acquisition Inc., the Warsaw-based orthopedic devices manufacturer’s parent company, has registered with the Securities and Exchange Commission for a proposed initial public offering of common stock.

Some decisions have yet to be made, including the IPO’s date, number of shares and price range, officials announced Friday.

Before the offering closes, LVB Acquisition will change its name to Biomet Group Inc.

Officials plan to use IPO proceeds to pay down debt.

As of Nov. 30, Biomet had $5.9 billion in long-term debt and $176 million in cash and cash equivalents, according to Thursday’s filing. The company’s fiscal year ends May 31. Nov. 30 was the end of its second fiscal quarter.

But before the sale can begin, Biomet officials will embark on a “road show,” or multicity tour, to talk to prospective investors and show their business plan.

They hope to persuade institutional investors and analysts that the stock will be a promising investment.

Part of the IPO process also involves highlighting the company’s potential weaknesses, however.

The SEC filing includes more than 30 pages of detailed risks associated with owning Biomet stock.

Many include standard hazards, including the possibilities that the economy could collapse or that key company officials could leave for other jobs.

But other risks are unique to Biomet or the medical devices industry.

They include:

•Potential future losses. The company has reported losses in the past and could again. For the past three fiscal years, Biomet’s annual losses have totaled $1.9 billion.

•Government investigations. Biomet is the subject of various ongoing state and federal investigations, including an examination into whether a subsidiary improperly paid surgeons to use its products and an inquiry into whether Biomet bribed foreign officials.

•Product liability lawsuits. The company could take a financial hit if its recent settlement doesn’t progress as expected. As of March 3, there were 1,231 lawsuits pending in a multidistrict litigation associated with metal-on-metal hip replacement devices. More suits may be filed until April 15.

Biomet also warns potential investors that it doesn’t expect to pay dividends for the foreseeable future.

Some of the company’s loan agreements forbid paying dividends while Biomet is still – in the company’s own words – highly leveraged.

In 2007, a private-equity consortium paid $11.4 billion for Biomet, a transaction the new owners characterize as a merger.

Before that, company shares traded on the Nasdaq stock market.

Biomet had a rocky decade leading up to the sale.

From 1996 to 2006, total recorded expenses for stock-option grants and actual expenses for the grants differed by about $50 million, according to the company’s internal investigation.

The difference muddled earnings figures, led the company to temporarily put off earnings reports and restate others and prompted the resignations of prominent executives.

Dane Miller, a company founder and former CEO, abruptly resigned in March 2006, citing communication issues with outside board members.

Miller, who stayed on in an advisory capacity, was part of the private equity consortium that acquired the company.

Joint book-running managers for the IPO will be BofA Merrill Lynch; Goldman, Sachs & Co.; J.P. Morgan; Citigroup; Wells Fargo Securities; Barclays; and Morgan Stanley.

sslater@jg.net

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