Zimmer Holdings Inc., a maker of artificial hips and knees, agreed to acquire rival Biomet Inc. for $13.4 billion to increase its range of products as demand for orthopedic devices recovers.

Closely held Biomet’s parent, Biomet Group Inc., will withdraw its plans for an initial public offering, Warsaw, Indiana-based Zimmer said in a statement today. Biomet’s owners included Blackstone Group LP, TPG Capital and Goldman Sachs Group Inc. at the time the company announced it would seek an IPO in March.

The deal will help Zimmer compete with Johnson & Johnson and Stryker Corp. in a now-growing $45 billion market where sales had been hurt during the recession by people putting off elective surgeries. Biomet’s offerings increase Zimmer’s range of products and the geographic areas, said Jason McGorman, an analyst at Bloomberg Industries in Princeton, New Jersey.

“This will give Zimmer some leverage when they go to hospitals, and help them compete,” McGorman said in a telephone interview. Also, “they get a little more in terms of products in other areas, like sports medicine, extremities and trauma, where Zimmer has less exposure.”

The two companies, which are located in the same town, expect to generate cost savings of $135 million in the first year and $270 million by the third year. The savings will contribute $1.15 to $1.25 in earnings a share during the first year, said James Crines, Zimmer’s chief financial officer, on a conference call.

$10.4 Billion

Zimmer will pay $10.4 billion in cash and issue $3 billion in shares to Biomet investors, according to the statement. The deal includes debt.

Zimmer rose 16 percent to $106.22 at 9:05 a.m. New York time. The company’s shares had gained 23 percent in the 12 months through yesterday.

Zimmer’s announcement follows a flurry of deals among drugmakers this week. Novartis AG agreed to buy GlaxoSmithKline Plc’s oncology business for as much as $16 billion, to sell Glaxo its vaccines line for up to $7.1 billion and to sell its animal health business to Eli Lilly & Co. for $5.4 billion. Valeant Pharmaceuticals International Inc., meanwhile, announced a bid to buy Allergan Inc. for $45.7 billion.

Zimmer said it’s confident it will get the deal through regulators and close by the first quarter of 2015.

Financial Advisers

Credit Suisse Securities LLC is acting as financial adviser for Zimmer and White & Case LLP acted as legal adviser, according to today’s statement. BofA Merrill Lynch was lead financial and strategic adviser for Biomet, with Goldman Sachs as co-adviser, to Biomet. Cleary Gottlieb Steen & Hamilton LLP is Biomet’s legal adviser and regulatory legal adviser in Europe, and Weil, Gotshal & Manges LLP acts as regulatory legal adviser in the U.S.

Biomet, which was taken private in a 2007 by a group of private equity firms, had filed to sell shares in a U.S. in an initial public offering last month. The company listed the deal as potentially worth $100 million and planned to use the proceeds to pay down debt.