Zimmer Biomet has signed a definitive agreement to acquire Paragon 28 for an enterprise value of approximately $1.2bn, which will significantly bolster the former’s foot and ankle offerings.

The cash transaction is valued at $1.1bn in equity value, with Paragon 28 shareholders receiving $13.00 per share upfront.

Additionally, the agreement includes a contingent value right (CVR) that could add up to $1.00 per share based on future revenue milestones. The CVR payments will be calculated on a sliding scale if net sales fall between $346m and $361m.

Both companies’ boards have unanimously approved the proposed transaction, which is subject to regulatory approvals, as well as that of Paragon 28 shareholders, and other standard closing conditions. The transaction is anticipated to close in the first half of this year.

This strategic acquisition is expected to enhance Zimmer Biomet’s product offerings, leveraging Paragon 28’s technology.

The transaction complements the worldwide presence and current infrastructure of Zimmer Biomet by integrating Paragon 28’s portfolio, which is anticipated to promote adoption and expedite growth both in the US and internationally.

It will also expedite penetration opportunities in the ambulatory surgical centre (ASC) space.

Paragon 28 chairman and CEO Albert DaCosta said: “Joining Zimmer Biomet is an exciting new chapter for Paragon 28 and an incredible opportunity to advance our mission and continue to deliver groundbreaking solutions in the foot and ankle segment.”

Financially, the acquisition is projected to instantly boost Zimmer Biomet’s revenue growth. The company also plans to finance the transaction using cash and debt financing while maintaining a robust balance sheet.

Goldman Sachs & Co is the exclusive financial adviser to Zimmer Biomet, with Hogan Lovells US acting as legal adviser.

Piper Sandler & Co is to provide exclusive financial advisory services for Paragon 28 while Cravath, Swaine & Moore will act as its legal advisers.

Last month, Zimmer Biomet received 510(k) clearance from the US Food and Drug Administration for its OsseoFit Stemless Shoulder System.