STERIS plc has signed a definitive agreement to purchase Key Surgical, a portfolio company of Water Street Healthcare Partners LLC, through a U.S. subsidiary for $850 million. STERIS anticipates that the acquisition will qualify for a tax benefit related to tax deductible goodwill. Adjusting for the present value of the anticipated tax benefit, the purchase price is effectively reduced to approximately $810 million.
Key Surgical, founded in 1988, is a global provider of consumable products serving hospitals and surgical facilities. Annual revenue for Key Surgical in calendar 2020 is anticipated to be approximately $170 million, with adjusted EBIT of approximately $50 million.
Under the terms of the agreement, STERIS will purchase the shares of Key Surgical at closing. The transaction will be financed through a combination of debt and cash on hand and is anticipated to close by December 31, 2020, pending customary closing conditions and regulatory approval. The transaction is expected to be immediately accretive to STERIS’s adjusted earnings after close and add approximately $40 million to revenue and about $0.10 to adjusted earnings per diluted share in STERIS’s fiscal 2021 fourth quarter. STERIS expects to realize annualized pre-tax earnings synergies of $10 million-$15 million by year three following the close.