MENTOR, OHIO (July 17, 11:30 a.m. ET) - - A combination of two Northeast Ohio medical equipment manufacturers that are neighbors is in gear.
Steris Corp. has agreed to buy privately held United States Endoscopy Group Inc. in what Steris said is a $270 million all-cash transaction.
US Endoscopy, as it is known, shares a driveway with Steris, as the headquarters of the two companies are adjacent to one another in Mentor. US Endoscopy is a maker of endoscopy devices, while publicly traded Steris is a producer of medical sterilization equipment and hand sanitizer.
US Endoscopy said it expects the transaction to close in the next few months.
In commenting on the deal, Steris President and CEO Walt Rosebrough said the addition of US Endoscopy “is a natural extension of our presence in the GI (gastrointestinal) market.” He said the acquisition “is aligned with our strategy to expand in areas with attractive market dynamics that are adjacent to our current businesses.”
“We are impressed with the strength of their management team and look forward to working with them to capture the opportunities ahead of us,” Rosebrough said.
US Endoscopy said its shareholders chose Steris over other suitors “in order to keep the US Endoscopy family they have built over the last 20 years together.”
“We are absolutely delighted to have the opportunity to join forces with Steris, a company we respect and obviously know well,” Gulam Khan, US Endoscopy president, CEO and co-chairman, said in a statement.
“Not only will we gain the size and scale necessary to continue to innovate and grow globally over the long term, we also ensure that we can and will remain a vital part of the Mentor and Greater Cleveland community,” Khan said.
Khan said keeping jobs local “was the driving influence in the shareholders' decision to team with their neighbor, recognizing that Steris offers a truly unique opportunity for keeping the company's operations and employees intact.”
Founded in 1991, US Endoscopy has about 400 employees, most of whom are based in Greater Cleveland. Local employees are concentrated in a three-building campus that includes the corporate headquarters, manufacturing operations and a distribution center that Steris also will purchase.
US Endoscopy does not make endoscopes — the devices that snake through the human body's existing pathways to peer into and operate in things such as stomachs and intestines. It makes tools that go on the end of the devices. The company uses plastics extensively in its products — Chris Kaye, the company's vice president of research and technical innovation, spoke about plastics' role in sustainable medical products at the recent Plastics in Medical Devices 2012 conference in Westlake, Ohio.
Steris said US Endoscopy last year generated revenue of about $70 million and operating income of about $14 million. Steris said due to transaction and integration costs and a less than a full-year impact of earnings, the transaction is anticipated to be dilutive by about five cents a share in fiscal 2013, which ends next March 31, but accretive in fiscal 2014 and beyond.
Steris said it believes the dilutive effect can be absorbed within its current earnings per share outlook of $2.00 to $2.20 per diluted share for fiscal 2013.