Steris Corp.’s takeover of Synergy Health Plc is being challenged by U.S. antitrust officials, who say the merger would hurt competition in the market for the sterilization of medical products.
The Federal Trade Commission said in a statement Friday it would seek a federal court order blocking the 1.2 billion-pound ($1.83 billion) deal pending an administrative proceeding in the agency’s in-house court.
The FTC said the deal would violate antitrust laws by significantly reducing future competition between the companies for radiation sterilization services for products including implanted medical devices and human tissue products, such as heart valves, skin grafts and corneas.
Steris, based in Mentor, Ohio, and Synergy, based in Swindon, England, said they will contest the lawsuit and extend the deadline for completing the deal to the end of the year. The FTC’s administrative complaint and the filing in federal court weren’t immediately available.
“It is unfortunate that we have come to this point with a transaction as strategic and geographically complementary as ours,” Steris Chief Executive Officer Walt Rosebrough said in a statement. “We have worked diligently to address the FTC’s concerns and to avoid litigation, but we will now focus our efforts on prevailing in court.”
The two companies agreed in October to the transaction, which would enable Steris to move to the U.K. for tax purposes. The combined company will be incorporated in the U.K., while its operational and U.S. headquarters will remain in Mentor, Ohio, according to the companies. Steris said at the time that the transaction wouldn’t clash with new regulations making it harder for U.S. companies to move their addresses abroad in so-called tax inversion deals.
Steris provides sterilization services for hospitals and clinics using gamma radiation. When the deal was announced, Synergy was planning to open new plants in the U.S. offering sterilization services using x-ray technology, which doesn’t raise the same environmental and regulatory issues because it uses electricity instead of radioactive isotopes, according to the FTC.
Most manufacturers of human tissue products outsource sterilization services to facilities within a 500-mile radius of production or distribution centers to contain costs, the FTC said.
The merger would probably eliminate competition between Steris’s services and Synergy’s planned facilities and deprive customers of an alternative sterilization service, according to the FTC.