Steris Agrees to Buy Synergy Health for $1.9 Billion

By Phil Serafino and Makiko Kitamura

Steris Corp. (STE), an Ohio-based maker of hospital sterilization products, agreed to buy Synergy Health Plc (SYR) for about 1.2 billion pounds ($1.9 billion) and move to the U.K. for tax purposes, a sign tougher rules against such transactions aren’t deterring some buyers.
Synergy holders will receive cash and stock valued at 19.50 pounds a share based on the Oct. 10 closing price for Steris, the companies said in a statement. The price is 39 percent above Synergy’s closing level on that day.
Steris’s planned move to the U.K. comes less than a month after U.S. Treasury Secretary Jack Lew tightened the rules on so-called tax inversions. Further restrictions require action by Congress, and Democrats and Republicans have
been unable to agree on legislation.
“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, said about the transaction. “The deal makes sense even in the absence of tax advantages.”
Synergy, based in Swindon, England, provides sterilization services for medical-device manufacturers, hospitals and other industries. The combined company will be incorporated in the U.K., while its operational and U.S. headquarters will remain in Mentor, Ohio, the companies said.

Cost Savings

There have been 45 completed inversions since 1982. The planned Steris one is the second such deal disclosed since the U.S. Treasury Department last month announced rules designed to deter them. Lodging company Civeo Corp. said on Sept. 29 would change its tax address to Canada. Including Steris, there are currently eight pending inversion transactions that are subject to a definitive agreement.
Steris will pay 4.39 pounds a share in cash and 0.4308 of a new Steris share for each Synergy one. The deal will bring together two complementary businesses and will lead to pretax cost savings of about $30 million annually, the companies said.
Synergy shares rose 30 percent to 18.22 pounds at 12:33 p.m. in London. Steris fell 2 percent to $56.38 on Friday.
By incorporating in the U.K., the combined company will have a tax rate of about 25 percent beginning in fiscal 2016, according to the statement. The U.S. corporate income tax rate is 35 percent, and the U.S. is one of the few industrialized countries that taxes its companies’ foreign income.
Bankers from Lazard advised Steris, and Wachtell, Lipton, Rose & Katz and Jones Day provided legal advice. Investec Bank Plc acted as financial adviser to Synergy, with DLA Piper as legal counsel.
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