STERIS Corporation announces a definitive agreement to acquire Integrated Medical Systems International, Inc. (IMS) for a purchase price of approximately $165 million, plus approximately $10 million for the purchase of real estate. IMS, a privately held business, is an endoscope repair, surgical instrument management and sterile processing consulting company. IMS revenue for the current calendar year is anticipated to be approximately $150 million.
Upon closing, IMS will be integrated into STERIS's healthcare segment as part of the company's Specialty Services business, which provides a variety of services to customers including surgical instrument repair and endoscope repair.
"A key element of our growth strategy has been to expand our specialty services business through a combination of organic growth and acquisition," says Walt Rosebrough, president and CEO of STERIS Corporation. "We are excited about this opportunity to build upon what we do best -- help our hospital customers improve processes, increase quality and save money."
The transaction is subject to customary closing conditions and regulatory approval, including the expiration or termination of the Hart-Scott-Rodino Antitrust Improvements Act waiting period, and is anticipated to close in the first quarter of fiscal 2015. STERIS will finance the acquisition through borrowings under its existing credit facility.
The surgical instrument repair, endoscope repair, and sterile process consulting business are fragmented with many local and regional competitors, as well as OEM manufacturers who operate nationwide. In addition, many hospitals currently perform certain of these services for themselves. The company believes that demand for these services in the U.S. is growing in the mid- to high-single digits annually.
STERIS anticipates that the acquisition will qualify for a joint election tax benefit under Section 338(h)(10) of the Internal Revenue Code, which allows goodwill and intangibles to be fully deductible for tax purposes. Adjusting for the present value of the anticipated tax benefits, the purchase price is effectively reduced to approximately $140 million. Excluding deal related expenses, amortization of intangibles and integration costs, the company anticipates that IMS would contribute approximately $15 million in operating income for a fiscal full year.
Lazard acted as financial advisor and Thompson Hine acted as legal advisor to STERIS in connection with the acquisition.
Source: STERIS Corporation