Kirschner Medical Corp., the Timonium-based manufacturer of replacement joints and other orthopedic products, announced yesterday that it plans to merge with Orthomet Inc. of Minneapolis.

Kirschner said it had signed a letter of intent with Orthomet and, assuming a formal merger agreement is concluded, the new entity will be 56 percent owned by the shareholders of Orthomet and 44 percent owned by those of Kirschner. Those percentages were based on the relative market capitalizations of the two companies, the announcement said.

Orthomet makes orthopedic reconstructive implant products and related surgical instruments. The merged company would have annual revenue of about $100 million.

"By emphasizing Kirschner's strong growth internationally and Orthomet's powerful domestic growth, we hope to be able to exploit the primary strengths of both companies," Kirschner Chief Executive C. Scott Harrison said.

The announcement did not say whether the merger would affect employment at either company.

Almost two years ago, Kirschner announced that it had agreed to be purchased by Henley International Inc. of Houston for roughly $37 million plus an assumption of debt. That deal fell through after the U.S. Food and Drug Administration abruptly canceled Kirschner's certificate of export, a document that offers foreign countries an assurance of a product's quality.

Kirschner has been able to continue selling its products abroad since the certificate is not required for export.

But the event was part of a five-year decline in earnings and stock price. As recently as 1991 the company's stock traded at $20.50. Yesterday Kirschner stock closed at $6 a share, unchanged from Tuesday's close.

Orthomet shares closed at $6.75, up 25 cents.

In the past year, Kirschner's earnings have stabilized, but speculation continued that it was looking for a strategic partner.