Sterigenics, a sterilization services provider owned by private equity firm GTCR LLC, will buy Canadian medical isotopes supplier Nordion Inc NDN.TO NDZ.N for $727 million.
The offer of $11.75 per share represents a 12 percent premium to Nordion's closing price on the New York Stock Exchange on Thursday, the companies said.
"That's basically what our fair value was (for Nordion), so we think they're getting a fair price," Morningstar analyst David Krempa said.
Nordion's U.S.-listed stock trades at 8.3 times forward earnings, a slight discount to the sector median of 11.4.
Nordion is one of the world's leading producers of molybdenum-99, an isotope used in medical imaging, and the company depends on raw material from an ageing Atomic Energy of Canada Ltd (AECL) facility in Chalk River, Ontario.
A medical isotope is a radioactive substance used mainly to diagnose illness.
The Canadian government said earlier on Friday it would remove the 25-percent foreign investment cap on Nordion in cases that are deemed to be of net benefit to Canada, under legislation introduced on Friday.
Spokespersons for Industry Minister James Moore, who would have to approve the purchase for it to go forward, did not immediately respond to queries as to whether Moore knew of Sterigenics' interest before the bill was introduced or whether he considered its takeover was of net benefit to Canada.
Ottawa-based Nordion hired advisers Jefferies & Co in early 2013 to examine options for its future, and the sale to Sterigenics would mark the completion of that review, said Nordion Chief Executive Steve West.
Deerfield, Illinois-based Sterigenics provides outsourced contract sterilization services to the medical, pharmaceuticals, food safety and specialty materials industries.
"Our focus is to ensure a stable long-term source of Cobalt-60 that will maintain customer confidence in the future availability and growth of gamma sterilization," said Michael Mulhern, chief executive of Sterigenics.
Cobalt-60 emits high energy gamma rays that are used to eliminate harmful organisms in a variety of products.
Upon closing of the deal, expected in the second half of 2014, Nordion will operate as a standalone company.
Stikeman Elliott LLP and Skadden, Arps, Slate, Meagher & Flom LLP were Nordion's legal counsel. Gowling Lafleur Henderson LLP and Kirkland & Ellis LLP were counsel to Sterigenics.
Nordion's shares have risen as much as 23 percent in the last three months to Friday's close of $10.41 on the New York Stock Exchange.
(Reporting By Sneha Banerjee in Bangalore, Rod Nickel in Winnipeg and Randall Palmer in Ottawa; Editing by Don Sebastian and Maju Samuel)