FTC loses bid to block $2B Steris-Synergy merger

A federal judge today shot down the U.S. Federal Trade Commission’s bid to block the pending, $1.9 billion merger between Steris (NYSE:STE) and Synergy Health.

The FTC claimed that Synergy was ready to bring new X-ray sterilization technology to the U.S., but pulled the plug after Steris put up its $1.9 billion offer and the FTC opened its investigation.

Judge Dan Polster of the U.S. District Court for Northern Ohio today rejected the FTC’s argument, ruling that Synergy decided to abandon the X-ray plan for legitimate business reasons.

“The timing of the decision to pull the plug on the U.S. x-ray project may actually be the best evidence that it was done for legitimate business reasons, as opposed to anti-competitive ones,” Polster wrote.

The evidence showed that Synergy pursued the X-ray project for 4 months after the merger was announced in October 2014, he wrote, “and in the midst of the FTC’s investigation, supports the conclusion that this was a decision reached by the project managers after serious consideration of all the business factors involved.”

“[T]he evidence shows that the negotiations between Steris and Synergy had no effect whatsoever on the work of Synergy’s U.S. X-ray team. The team continued to seek take-or-pay contracts from customers and there is evidence that Synergy incentivized that effort financially. The team continued to crunch the numbers in the business model, to negotiate concessions with states where they considered building the facilities, and to work diligently with IBA on the machine that would meet Synergy’s needs,” Polster wrote. “In the end, the evidence unequivocally shows that the problems that plagued the development of X-ray sterilization as a viable alternative to gamma sterilization in 2012 … were the same problems that justified termination of the project in 2015: The failure to obtain customer commitments and the inability to lower capital costs.”

Mentor, Ohio-based Steris earlier this week delayed shareholder votes on the proposed union to give Polster time to rule, moving its meeting from Sept. 24 to Oct. 2; Swindon, U.K.-based Synergy plans to hold its vote the same day, according to a regulatory filing.

The deal has been hanging in the balance since the FTC began reviewing it in October. The companies said in mid-January that the FTC had requested additional information and documentary material related to the deal, effectively extending the initial expected closing beyond March 31. In March the companies postponed a shareholder vote on their proposed merger in order to comply with an information request from the FTC. U.K. regulators approved the deal in February.

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