Steris to Buy U.K.-Based Synergy Health in Inversion Deal

Despite recent government action to limit inversion deals, the medical device industry seems to remain undaunted.

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 it 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 plc in an inversion deal. Outside the device industry, fast food chain Burger King plans to buy Canadian coffee-and-doughnut chain Tim Hortons.

Such deals have drawn backlash from public and lawmakers. The Obama administration recently enacted changes to make inversions less attractive. The Treasury Department recently rolled out new rules barring certain techniques that companies use to lower their tax bills and tightening 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., the president and chief executive of Steris, said in a statement.

“The combined entity brings together the strengths of both businesses, allowing New Steris to accomplish much more than either one of us could separately,” Richard Steeves, the chief of Synergy Health, said in a news release.

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 combined firm is expected to be listed on the New York Stock Exchange under the ticker STE. 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 serving 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.