Synergy Surges After Steris Defeats U.S. Move to Block Takeover

  • Federal judge rejects FTC bid to halt $1.9 billion merger
  • Synergy rises as much as 44 percent after court ruling

Synergy Health Plc soared in London, climbing the most in 14 years, after Steris Corp. defeated a move by U.S. officials to block the medical-device sterilization company’s planned takeover of its U.K. competitor.

U.S. District Judge Dan Aaron Polster in Cleveland denied the Federal Trade Commission’s request to temporarily halt the $1.9 billion merger pending an administrative trial in the agency’s in-house court. Steris climbed 8 percent in New York following the decision on Thursday, while Synergy rose as much as 44 percent to 2,280 pence on Friday.

The decision is a setback for the FTC, which is in the midst of investigating
Staples Inc.’s acquisition of Office Depot Inc. Office Depot rose 4.9 percent, and Staples rose 2.3 percent after the Steris decision.

The FTC sued Steris and Synergy in May, saying the deal would allow Steris to eliminate future competition and maintain its dominant market position along with another company, Sterigenics International LLC.

The three companies sterilize medical devices for manufacturers. Steris and Sterigenics provide sterilization using gamma radiation, and Synergy, based in the U.K., was planning to offer X-ray sterilization in the U.S. that would compete with gamma radiation, according to the FTC.

Synergy’s X-ray entry would provide an alternative for customers and reduce concentration in the market, the FTC said. With the acquisition, Steris would eliminate a “major threat,” the agency said in its complaint. It said the merger agreement caused Synergy to abandon the effort.

Polster rejected that argument, saying it was a decision based on legitimate business reasons: lack of customer demand.

“The evidence shows that the negotiations between Steris and Synergy had no effect whatsoever on the work of Synergy’s U.S. X-ray team,” Polster said.

The Steris case is the latest move this year by the FTC to stop a merger. The agency in February challenged the combination of food-distribution companies Sysco Corp. and US Foods Inc. and won a court ruling in June blocking the deal.

Steris, based in Mentor, Ohio, said last year it would buy Synergy and make the U.K. its home for tax purposes while keeping its operational headquarters in Ohio.

The agreement came less than a month after U.S. Treasury Secretary Jack Lew tightened rules to slow or stop the flow of companies using deals to move their addresses to other countries, lower their tax rates and gain access to overseas cash.

Steris and Synergy argued that the FTC’s request for an injunction should be denied. Synergy hadn’t formally decided to offer its X-ray sterilizations, and Steris placed “no value” on the project in evaluating the deal, they said.

“Synergy’s X-ray entry was bogged down, perhaps forever, by daunting financial and technological impediments,” the companies said in court papers.

Representatives of Steris, Synergy and the FTC didn’t immediately respond to
requests seeking comment on the decision.

The case is FTC v. Steris Corp., 15-01080, U.S. District Court, Northern District of Ohio (Cleveland)

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