Synergy Health share price soars as US rival Steris reignites tax inversion debate with $1.9bn deal

US medical technology giant Steris yesterday announced it had bought British health services provider Synergy Health in a $1.9bn (£1.2bn) deal that re-opened the US tax inversion debate.

 

Steris said it would buy Synergy, whose shares rocketed by more than 30 per cent yesterday, in a cash-plus-shares deal that would shift its domicile to the UK. This would cut its tax rate from 31.3 per cent this year to 25 per cent from next April.

 

New Steris is expected to have revenue of about $2.6bn and 14,000 em­ployees in 60 countries. Steris chief ex­ec­utive Walt Rose­brough will lead the new company, while Dr Richard Steeves, Synergy’s boss, and two other directors of the Swindon-based firm’s will join the board.

 

The draw of much smaller tax bills in Ireland and Britain has prompted US firms to attempt so-called “tax inversions”. At 40 per cent, the US has the world’s highest corporate tax rate. 

 

In September, the Obama administration said that companies would no longer escape tax on US earnings by restructuring under foreign ownership.

 

Panmure Gordon analyst Savvas Neo­phytou told City A.M. that the deal was “quite a significant mo­m­ent. It must also be viewed in the context of Pfizer coming back with a new bid for Astrazeneca”.

 

Pfizer has to wait until after 25 Nov­ember under UK takeover rules to make another bid after having its £69.6bn offer for the UK pharma giant rebuffed five months ago.

 

Synergy shares were up 31.43 per cent at 1,840p.

 

In January, The US viagra-maker bids £58.8bn to buy British rival Astrazeneca, and create a UK tax domicile. Pfizer is rebuffed even when it ups its offer to £63bn.

 

On 13 May, six US Senators criticised Pfizer for seeking a tax inversion.

 

Two days later, shadow business secretary, Chuka Umunna, has threatened to block the £63bn takeover if Labour came to power in May 2015, saying he would subject a deal to a public interest test.

 

After five attempts, in May UK drug maker Shire accepted US rival AbbVie’s sweetened £31.4bn takeover. The company will be tax domiciled in Jersey.

 

The move that would cut AbbVie’s effective corporation tax rate from 22 per cent to 13 per cent by 2016

 

Shares in Shire – and other UK pharma firms – fell sharply on 22 September after the US announced plans to curb inversion deals that allow US companies to cut their tax bills.

 

In late August, Burger King Worldwide announced a deal to acquire the Canadian coffee-and-doughnut chain Tim Hortons in a cash and stock deal worth $11.5bn (£7.1bn).

 

The deal, which would see the merged company tax domiciled in Canada, was the straw that broke the camel’s back, with treasury secretary Jacob Lew announcing rules to curb tax inversion deals.

 

Finance minister Joe Oliver denies it is a “tax dodge” because the firm will pay Canadian taxes.

 

 

1 Patrick is a director in Investec’s Corporate Broking team, based in London.

 

2 He has recently worked on the Gamma Telecom IPO, a small fundraising for Zotefoams, a funding round for global wireless chip company Nujıra and the Servelec IPO at the end of 2013.

 

3 Patrick has been at Investec since 2001 and before that he was 15 years in corporate broking at Smıth New Court/Merrıll Lynch

 

Lazard was financial adviser to Steris, while Wachtell, Lipton, Rose & Katz and Jones Day were its legal adviser. Investec Bank was the financial adviser to Synergy, while DLA Piper acted as legal counsel.