There’s news of a major merger in the medical device sector today. Zimmer Holdings, Inc. (NYSE:ZMH) and Biomet, Inc. published a joint press release today announcing that Zimmer was acquiring Biomet for $13.35 billion net including assuming debt. The deal should be finalized by the end of the first quarter of 2015.

Zimmer

Analysts and the companies have commented that the deal will create a new powerhouse in the musculoskeletal sector of the medical device industry.

Statement from Zimmer

“This is a milestone combination that brings together two highly complementary organizations and is consistent with our mission to lead the industry in delivering value to healthcare providers, their patients and stockholders,” said David Dvorak, the President and CEO of Zimmer Holdings, Inc. (NYSE:ZMH). “The transaction positions the combined company as a leader in the musculoskeletal industry with a broad portfolio of products, technologies and services, enabling us to help shape how solutions are developed and delivered. Together with Biomet we will expand the scope of our innovation programs and will enhance our efforts to provide integrated services and comprehensive solutions that address the needs of our customers. At the same time, we believe that this merger will further support our long-term growth and stockholder value creation strategies.”

Benefits of the deal

A more comprehensive portfolio —  The combined company will be able offer a broad range of personalized solutions to benefit providers, medical professionals and patients.

Musculoskeletal diversification and scalable platforms — The combined company will provide a greater breadth of musculoskeletal medical devices to improve the lives of patients. The resources of the new firm will permit diversification in the knee, hip, surgical, spine and dental categories, and allow for further development in the sports medicine, extremities and trauma categories.

Global distribution channels — Both companies have talented and experienced employees and sales representatives with strong customer relationships. The combined company’s broader portfolio will be a big boost to the global sales force, allowing for increased sales and improving patient outcomes in a cost-effective manner.

Stronger financial profile and solid earnings accretion: The 2013 calendar year revenues of Zimmer and Biomet were $7.8 billion, with a combined adjusted EBITDA of $2.8 billion. The acquisition is anticipated to be double-digit accretive to Zimmer Holdings, Inc. (NYSE:ZMH)’s adjusted diluted earnings per share in the first year. The company also says it is projecting net annual synergies of around $270 million by the third year, with at least $135 million savings in the first year

Improved cash flow — The new company is expected to generate operational cash flow greater 1.5 times Zimmer Holdings, Inc. (NYSE:ZMH)’s stand-alone financials.