Zimmer Holdings has received a fully underwritten $1.75 billion credit line from Credit Suisse First Boston, J.P. Morgan and Bank of America to back the $3.2 billion bid for orthopedic device maker Centerpulse. Zimmer's bid is higher than an agreed offer from Britain's Smith & Nephew for $2.5 billion and now Zurich, Switzerland-based Centerpulse's shareholders can review both transactions, said a source. Zimmer's offer is comprised of $1.2 billion in cash and $2 billion in stock.
During an analyst conference call, Sam Leno, senior v.p. and cfo at Zimmer, announced that the credit line will be syndicated prior to the closing of the proposed acquisition and will be used to fund the cash portion of the offer, refinance all the existing debt of Centerpulse and Zimmer and fund integration costs. The line is comprised of a $400 million, 364-day revolver, an $800 million, three-year revolver and a $550 million, five-year term loan. Moody's Investors Service placed the Baa3 senior unsecured bank credit facility rating of Zimmer under review for possible downgrade. The transaction represents a very large increase in debt for Zimmer, which has essentially delevered following its spin-off from Bristol-Myers Squibb in mid-2001, according to Moody's. A spokeswoman for Zimmer declined comment. Officials at CSFB could not be reached and J.P. Morgan and B of A bankers did not return calls.