News Feature | October 15, 2014

Steris Buys Synergy In $1.9 Billion Inversion Deal

By Jof Enriquez,
Follow me on Twitter @jofenriq

Net Neutrality And VARs

Undeterred by new restrictions discouraging inversion deals, Ohio-based Steris Corporation said it has agreed to purchase England-based Synergy Health in a deal that would slash its tax liabilities.

Steris — a company that manufactures sterilizers, surgical tables, and endoscopic accessories for hospitals and medical device companies — will acquire peer company Synergy for approximately $1.9 billion, or $31.35 per share in a cash and stock deal, according to a Steris press release. The combined business is expected to generate about $2.6 billion in revenue from 60 countries and will have 14,000 employees.

“Together, we create a balanced portfolio of products and services that can be tailored to best serve the evolving needs of our global customers,” Walt Rosebrough, president and CEO of Steris Corporation, said in the joint statement. “Once the transaction is completed, New STERIS will be a stronger global leader in infection prevention and sterilization, better-positioned to provide comprehensive solutions to medical device companies, pharma companies, and hospitals around the world.”

The new company will be incorporated in the U.K. but will keep its operational headquarters in Mentor, Ohio. Current Steris chief executive Walt Rosebrough will be CEO of the combined company. New STERIS will pay an effective tax rate of 25 percent starting fiscal year April 1, compared to the 31.3 percent tax rate that Steris paid in 2013, according to Reuters.

In a conference call, Steris executives 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” when it unveiled new tax rules that made it harder for American companies to re-domicile in foreign shores, according to Bloomberg.

“There’s a lot of political noise around tax inversions, but this is primarily a U.S. company acquiring a company in the same space with a very good international presence,” Charles Weston, an analyst at Numis Securities in London, told Bloomberg. “The deal makes sense even in the absence of tax advantages.”

Those new tax restrictions have caused some companies to reconsider inversions. As the New York Times reported, Salix Pharmaceuticals of North Carolina this month called of its planned acquisition of an Irish unit of an Italian drug maker.

On the other hand, bigger companies are pushing ahead by adjusting purchase terms. Medical device giant Medtronic recently restructured its $42.9 billion transaction to merge with Irish firm Covidien.