UK medical firm Synergy bought by Steris

Synergy Health, a British health outsourcing business, has agreed to be taken over by a US group in a $1.9bn ($1.2bn) deal that will see the American company move its tax base to the UK.

The proposed acquisition of the Swindon-based Synergy by Steris Corporation is the latest attempt to pull off a tax inversion deal, despite political opposition on both sides of the Atlantic to the controversial manoeuvre.

The enlarged company will be incorporated in the UK but its operational and US headquarters will remain at Steris’s base in Mentor, Ohio. Its shares will be listed on the New York stock exchange. By incorporating in the UK, Steris said, the company would have a tax rate of about 25%, beginning next year. Steris paid an effective tax rate of 31.3% last year.

The companies expect at least $30m of pre-tax cost savings that include reduced back-office infrastructure and “eliminating redundant public company costs”.

Synergy, which sterilises medical equipment for hospitals and medical device makers, employs 5,700 people, including 2,200 staff in the UK and Ireland. Steris, a maker of medical sterilisers and detergents, said it shared a strategic vision with Synergy.

The cash and shares transaction, based on Steris’s closing share price on Friday, values Synergy at £19.50 a share – 39% more than Synergy’s closing price. Synergy’s shares jumped 31% to £18.34.

A spate of US companies have sought acquisitions in the UK and elsewhere this year to gain a lower rate of corporation tax. Tax inversion deals have alarmed policymakers in the US but the White House and Congress have failed to agree on legislation to tackle such transactions.

Last month the Obama administration announced new rules – but not new legislation – designed to deter inversion deals and close what Jack Lew, the US treasury secretary, called an unfair loophole.

An aborted £69bn takeover approach this year by the US drugs group Pfizer for its British rival AstraZeneca raised the profile of inversions, which are seen as artificial manoeuvres that allow US companies to avoid paying taxes at home.

AstraZeneca expressed concerns over the tax inversion tactic in its defence against Pfizer, while Vince Cable, the business secretary, said Pfizer would not be allowed to use the UK as a tax haven. The inversion tactic became a test of White House resolve after Burger King agreed to buy the smaller Canadian fast-food chain Tim Hortons last month and shift its headquarters to Canada.

Steris’s planned takeover of Synergy is the second inversion deal since the Obama administration announced its measures, which are also meant to deter companies from parking profits overseas. The lodging company Civeo said last month that it would relocate its tax address to Canada.

The desire of US companies to move to the UK has partly been driven by the chancellor, George Osborne, who has cut corporation tax by a percentage point each year under the coalition. The rate is set to fall to 20% next year, against the US federal rate of 35%.

Synergy, which sterilises more than 75m surgical instruments for hospitals a year, would also bring Steris customers in the medical device industry that complement the US company’s business, the companies said.

Walt Rosebrough, Steris’s chief executive, will head the company. Richard Steeves, Synergy’s boss, and two other Synergy directors will join the board.

Rosebrough said: “Once the transaction is completed, New Steris will be a stronger global leader in infection prevention and sterilisation, better positioned to provide comprehensive solutions to medical device companies, pharma companies, and hospitals around the world.”

In a separate trading update, Synergy said revenue for the six months to the end of September had risen 2.8% to £197.6m. Excluding currency movements, revenue rose 7.4%.