Steris Buys U.K.-Based Synergy Health in Inversion Deal

Despiterecent government actionto limit inversion deals, the medical device industry seems determined to part ways with Uncle Sam.

Mentor, Ohio-based Steris Corp. is buying United Kingdom based sterilization services company Synergy Health plc for about $1.9 billion. Steris expects to close its deal by March 31. It will pay about $31.35 in cash and stock for each Synergy share.

Steris makes infection prevention products and services. Its portfolio includes sterilizers, surgical tables, detergents and laboratory testing services. Synergy Health PLC provides sterilization services for medical device makers, hospitals and other customers. The companies expect their combination to yield pre-tax cost savings of at least $30 million after 2016.

Steris officials said the new company will maintain operational headquarters in Ohio, but will incorporate in the United Kingdom, where it will have a tax rate of about 25 percent starting in 2016.
Medtronic Inc. is paying nearly $43 billion to buy Ireland-based Covidien plcin the industry’s largest inversion deal.

Such deals have drawn backlash from public and lawmakers. The U.S. Treasury Department implemented new rules in late September designed to make inversions less attractive. The new rules bar certain techniques companies use to lower their tax bills and tighten ownership requirements that must be met for inversions to occur.

“Together, we create a balanced portfolio of products and services that can be tailored to best serve the evolving needs of our global customers,” Walter M. Rosebrough Jr., president/CEO of Steris, said.
“The combined entity brings together the strengths of both businesses, allowing New Steris to accomplish much more than either one of us could separately,” Synergy Health CEO Richard Steeves said.

Rosebrough will remain as CEO and along with most members of senior management, will reside in northeast Ohio. Steris plans to expand the board of directors to 13 members, of whom 10 will be the current Steris directors and three will be current members of Synergy’s board. Steeves is included in the three new directors. The boards of both companies have unanimously recommended the transaction.

Upon closing, the combined business (to which execs are referring as “New Steris”) will have approximately $2.6 billion in annual revenues from more than 60 countries, approximately 14,000 employees, and will bring together geographically complementary businesses.

For medical device manufacturers, the Steris Isomedix and Synergy’s Applied Sterilization Technologies (AST) will create a global supplier to serve medical device customers with a network of 58 facilities in 18 countries. For hospitals, the combination of Steris’ Infection Prevention and Services businesses with Synergy’s Hospital Sterilization Services will strengthen the firm’s offering of sterilization outsourcing worldwide, officials said.