STERIS plc (NYSE: STE), a provider of infection prevention products and services, on Tuesday morning, Oct. 6, announced it has agreed to buy Key Surgical, a portfolio company of Water Street Healthcare Partners LLC, for $850 million.
STERIS, which is located in Mentor but now technically based in Dublin, Ireland, for tax purposes, said in a news release that the acquisition will be made through a U.S. subsidiary and is expected to "qualify for a tax benefit related to tax deductible goodwill." Adjusting for the present value of that anticipated tax benefit, STERIS said, the purchase price "is effectively reduced to approximately $810 million."
Key Surgical, founded in 1988, is a global provider of consumable products serving hospitals and surgical facilities. It's based in Eden Prairie, Minn., a suburb of Minneapolis. STERIS said Key Surgical's revenue for calendar year 2020 "is anticipated to be approximately $170 million," with adjusted EBIT (earnings before interest and taxes) of about $50 million.
Water Street Healthcare on its website states that it has owned Key Surgical since 2017, and that the company has about 270 employees.
Walt Rosebrough, president and CEO of STERIS, said in a statement that the acquisition of Key Surgical "strengthens, complements and expands STERIS' product offering and reach around the globe. Their focus on the sterile processing department, operating room and endoscopy fits perfectly with our core health care customers."
He added, "The business has demonstrated an ability to grow at rates above industry levels with its product portfolio breadth, a steady stream of new products and a highly effective commercial model."
Under the terms of the agreement, STERIS said, it will buy the shares of Key Surgical at the deal's closing. The transaction will be financed "through a combination of debt and cash on hand" and is expected to close by Dec. 31, pending customary closing conditions and regulatory approval, the release stated.
STERIS said the transaction is expected to be "immediately accretive" to its adjusted earnings after close and add about $40 million to revenue and about 10 cents to adjusted earnings per diluted share in its fiscal 2021 fourth quarter.
According to its website, STERIS has about 12,000 employees worldwide and operates in more than 100 countries.
The company's stock closed trading on Monday, Oct. 5, at $174.72 per share. Its 52-week high is $178.76, and the 52-week low is $105.69. MarketWatch.com reported that STERIS shares "have added 15% in the year to date, while the S&P 500 has gained 5.5%."