STERIS (STE) considering sale of non-essential debt repayment arm

STERIS STE has entered into an asset purchase agreement to sell the company’s nephrology business to certain subsidiaries of Evoqua Water Technologies Corp. AQUA. The value of the transaction was settled for a cash consideration of $ 196.3 million, subject to certain potential adjustments, including a customary working capital adjustment.

STERIS aims to use the proceeds to repay debt. Following the news, STERIS shares rose nearly 2% to close at $ 231.21 yesterday.

Details of the spin-off

This Renal Care activity was initially acquired by STERIS as part of the Cantel Medical operation, which closed on June 2, 2021. The activity was mainly integrated into the Healthcare segment of STERIS and was historically operated by Mar Cor Purification (manufacturer and, commercial and industrial solutions in North America) and Cantel Medical, subsidiaries of STERIS.

The transaction is expected to close in the first quarter of calendar year 2022.

The Renal Care business currently has 27 service and reclamation facilities in the United States and Canada, and offers technical expertise in the design, construction and maintenance of high purity water treatment systems at a installed base of approximately 5,500 sites.

Acquisition by STERIS of Cantel Medical and Debt Position

In June, STERIS acquired Cantel Medical, a global provider of infection prevention products and services, primarily to endoscopy and dental customers. The integration has strengthened and extended STERIS ‘endoscopy offerings, adding a full line of high-level disinfection consumables, capital goods and services as well as additional single-use accessories. Following the acquisition, STERIS has made a number of decisions that will impact how it approaches the market with its customer-centric mindset. This includes creating a sales channel dedicated solely to reprocessing endoscopes to leverage the talent and expertise of Cantel’s sales organization.

The acquisition agreement was closed for a total equity value of nearly $ 3.6 billion and a total enterprise value of approximately $ 4.6 billion, including net debt and notes convertibles from Cantel Medical.

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For the transaction, the company had secured fully committed bridge financing and had committed to repay a significant amount of Cantel Medical’s existing debt with nearly $ 2.0 billion in new debt.

Following the completion of this acquisition, STERIS currently has a total debt of $ 3.44 billion (at the end of the second quarter of fiscal 2022). The latest split of the company’s Renal Care activity, which is not at the heart of STERIS ‘activity, should therefore partially reduce the burden of the company’s debt.

Price return

The company’s shares have gained 26.6% in one year compared to industryan increase of 6.9%.

Rank of Zacks and choice of keys

Currently, STERIS carries a Zacks Rank # 3 (Hold).

Some actions better classified in the wider medical space are Apollo Endosurgery, Inc. APEN, and Thermo Fisher Scientific Inc. TMO, each carrying a Zacks Rank # 2 (Buy). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Apollo Endosurgery has a long-term profit growth rate of 7%. The company has beaten earnings estimates in the past four quarters, delivering a surprise of 25.6% on average.

Apollo Endosurgery has outperformed its industry over the past year. APEN gained 131.2% against 7.7% growth for the industry.

Thermo Fisher shows a long-term profit growth rate of 14%. The company has beaten earnings estimates over the past four quarters, delivering an average surprise of 9%.

Thermo Fisher has outperformed its industry over the past year. TMO grew 40.7% compared to the industry’s 7.7% increase.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tana T. Thorsen