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STERIS (STE) to Expand Product Suite Via Cantel Medical Buyout

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STERIS plc STE recently announced its signing of a definitive agreement to acquire Cantel Medical Corp. CMD through a U.S. subsidiary, a plan which has been unanimously approved by the managements of both companies. The agreement is expected to close by the end of STERIS’s first quarter of fiscal 2022 (ending Jun 30, 2021), pending customary closing conditions including receipt of regulatory approvals and approval by Cantel stockholders.

For investors’ note, the companies expect to realize annualized pre-tax cost synergies or savings in operating costs of approximately $110 million by the fourth year following the close. However, cost savings of approximately 50% is likely to be achieved in the first two years itself.

With the latest buyout, STERIS aims to strengthen its Healthcare business on a global scale.

Rationale Behind the Buyout

Per STERIS’ management, the company’s decision to acquire Cantel Medical is expected to complement and extend its product and service offerings, global reach and customer service. The combination of the companies will offer a more diversified selection of infection prevention and procedural products and services to a wider customer population. The latest buyout will aid STERIS to strengthen and expand its endoscopy offerings by adding a full suite of high-level disinfection consumables, capital equipment and services along with additional single-use accessories. Further, Cantel’s Dental business will enable STERIS to extend into a new customer territory where there is an increasing focus on infection prevention protocols and processes.

Cantel Medical’s management is looking forward to accelerate progress on its Cantel 2.0 initiatives along with driving enhanced value for shareholders, and the healthcare providers and systems following the acquisition.

Industry Prospects

Per a report by Markets And Markets, the global infection control market is projected to reach $27.45 billion by 2024 from $19.97 billion in 2019 at a CAGR of 6.6%. Factors like the high incidence of hospital-acquired infections and technological advancements in sterilization equipment are expected to drive the market.

Given the market potential, the latest buyout is expected to significantly boost STERIS’ Healthcare business.

Notable Developments

Of late, STERIS has been witnessing a few developments across its businesses.

The company, in November 2020, completed the previously announced acquisition of Key Surgical, a portfolio company of Water Street Healthcare Partners, LLC, through a U.S. subsidiary. Notably, the buyout was initially announced in October 2020.

STERIS, during its fiscal second-quarter 2021 earnings release in the same month, witnessed a robust increase in consumable revenues.

Price Performance

Shares of the company have gained 26% in the past year compared with the industry’s 23.6% growth and the S&P 500’s 17.6% rise.

Zacks Rank & Key Picks

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

Some better-ranked stocks from the broader medical space are Hologic, Inc. HOLX and IDEXX Laboratories, Inc. IDXX.

Hologic’s long-term earnings growth rate is estimated at 17.4%. The company presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX’s long-term earnings growth rate is estimated at 15.8%. It currently carries a Zacks Rank #2 (Buy).

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Hologic, Inc. (HOLX) : Free Stock Analysis Report
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