$1.9 Billion Steris-Synergy Merger Could Be Delayed By FTC
By Jof Enriquez,
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The U.S. Federal Trade Commission (FTC) recently asked both Steris Corporation and Synergy Health to provide additional details regarding their proposed merger. The request will likely delay the completion of the deal to a date later than anticipated.
Steris revealed in a recent regulatory filing that Steris and Synergy "have each received a request for additional information and documentary material, often referred to as a ‘second request,’” from the FTC. The nature of the requested information was not disclosed. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the issuance extends the mandatory review period by 30 days after both companies comply with the request. The FTC may shorten the waiting period as it deems fit.
In the filing, Steris noted that the deal may not be approved by March 31, 2015, as originally expected. It did say that both companies are working to have the deal completed sometime during the first quarter.
Steris announced the $1.9 billion tax inversion deal last October. The medical equipment supplier said that the newly formed company is expected to generate about $2.6 billion in revenue from 60 countries and will have 14,000 employees worldwide, according to a previous Med Device Online (MDO) article.
U.S. officials and regulators have scrutinized the inversion deals being attempted by a growing number of American companies. By acquiring a foreign company, these deals allow U.S. companies to move their tax bases overseas, effectively reducing their corporate tax rates.
In this case, the deal will slash Steris' tax rate from its current 31.3 percent tax rate down to 25 percent, after incorporating in the United Kingdom.
Officials accuse companies of unfairly gaming the U.S. corporate tax system by entering into inversion deals. As a response, the Treasury Department last year introduced new measures to curtail inversions.
However, Steris went ahead with the transaction. It said that the “new tax structure shouldn’t clash with U.S. regulations because the company doesn’t plan to use some of the techniques described by the Treasury Department,” according to the previous MDO article.
However, the stock ownership of the newly formed company will "fit within the fresh standards imposed by the U.S. Treasury weeks earlier," according to a Law360 article, meaning that the newly formed company will not be subject to U.S. taxes. The deal calls for Ohio-based Steris shareholders to hold an approximately 70 percent stake in the new company, with Synergy shareholders owning the remaining shares. According to the new regulations, a U.S. company is only treated as such and subject to U.S. taxes if it retains at least 80 percent of the inverted company.