Synergy Health bets on U.S. markets with SRI/Surgical buy

Thu Jun 7, 2012 6:29am EDT

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(Reuters) - Synergy Health Plc (SYR.L) said it would buy U.S. based SRI/Surgical Express Inc STRC.O to increase its presence in the world's largest healthcare market and expand its reach out of the struggling UK and European economies.

Synergy, a healthcare services provider, said it would pay $3.70 per SRI share, a 2 percent discount to SRI's closing price on Wednesday, valuing the company at $25.1 million.

"We were looking to enter the U.S. hospital sterilization market in 2014, but we decided to bring that forward," Chief Executive Richard Steeves told Reuters.

SRI/Surgical is a supplier of sterile surgical gowns and surgical instruments to hospitals and surgery centers in the United States.

He added that the company was under-invested in the United States, which is at the helm of the healthcare market.

Synergy reported a 13 percent rise in full-year adjusted profit on the back of a strong performance in emerging markets.

It expects the bulk of its future growth to come from Asia, particularly China, and from the United States, with both markets continuing to grow at 25 percent to 30 percent.

Synergy has been developing its hospital outsourcing service in the United States, and had acquired MSI Surgical Solutions, a provider of outsourced sterilization services in the country, in March.

"Synergy continues to diversify sales away from UK/Europe into faster growing international markets," Peel Hunt analyst Paul Cuddon said.

"SRI's cost base needs restructuring, but together with MSI, provides an excellent base to grow in the United States."

Synergy expects the deal, which it will fund through existing debt facilities, to add to its earnings from the first financial year.

Certain SRI shareholders, who hold about 32 percent of the company's outstanding stock have agreed to tender their shares to Synergy, CEO Steeves said. Holders of an additional 8 percent stake are expected to commit to tendering their shares on Thursday.

For the year ended April 1, Synergy's adjusted pre-tax profit rose to 43.4 million pounds ($67.09 million) from 38.3 million pounds last year.

Revenue rose 9 percent to 312 million pounds. Revenue from Asia and Africa grew 32 percent.

Synergy shares were up marginally at 828 pence at 6:22 a.m. EDT (1022 GMT) on the London Stock Exchange on Thursday. SRI/Surgical Express closed at $3.77 on Wednesday on the Nasdaq.

(Reporting by Monika Shinghal in Bangalore; Editing by Roshni Menon)

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