Medical equipment manufacturer Steris plc (NYSE: STE) is acquiring Cantel Medical Corp in a cash-and-stock deal worth $4.66 billion, including debt. The acquisition agreement brings together two of the largest provider of sterilization products. Following the acquisition news, shares of Cantel closed almost flat at $83.87. However, shares of Steris finished Tuesday’s trading at $192.06, down $8.40 or 4.19% from the prior close.
Under the takeover agreement, Cantel shareholders will be paid $16.93 in cash and 0.33787 shares of Steris for each Cantel-owned shares. Through a new debt of $2 billion, Steris intends to pay some money to Cantel shareholders and clear a considerable portion of Cantel’s prevailing debt. Steris already has made bridge financing arrangements for the deal, which is expected to close at the end of June 2021 (fiscal 2022 first-quarter of Steris).
Based on the Steris closing price of $200.46 on Monday, the acquisition deal pegs the value of Little Falls, New Jersey-based Cantel’s shares at $84.66, reflecting a market capitalization of $3.58 billion. Steris is not paying any premium for acquiring Cantel. The merged entity will be capable of cutting costs while expanding Dublin-headquartered Steris in the dental market. Specifically, by the fourth year, EBIT (earnings before interest and taxes) synergies of $110 million are anticipated.
The combined firm will steer through the COVID-19 pandemic, which has become both a blessing and a curse for the companies. While orders for medical equipment and associated services have decreased, demand for PPE (personal protective equipment) and other protective suites have skyrocketed.
The merged entity will provide a wide range of infection protection and other procedural products to a broad spectrum of customers, as per Steris CEO Walt Rosebrough.
Steris has an office in Mentor, Ohio, markets surgical tables, sterilization equipment, and many more products used in labs and hospitals. The company has a market cap of $17.30 billion. Similarly, Cantel mainly offers disposal items used in the endoscopy process, surgical masks, and aprons and towels used in dental care centers.
Law firm Jones Day guides Steris while Wachtell Lipton acts as an advisor to Cantel.
Notably, the acquisition follows two key healthcare deals that happened earlier this month. In the first week of January, UnitedHealth Group (UNH) stated that it is acquiring Change Healthcare (CHNG) in a $13 billion deal. Likewise, Centene (CNC) announced taking over Magellan Health in a $2.20 billion deal.
The takeover deal is expected to turn the stock of Steris bullish in the days ahead.
The historical price indicates that the stock is having solid support from the 50-day moving average. The MACD indicator is also rising. Therefore, we are expecting the stock to appreciate further in the days ahead.
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