Dive Brief:
- Steris said Monday it struck a $2.1 billion deal to acquire Xodus Medical for its portfolio of consumable healthcare products.
- Xodus’ portfolio includes Pink Pad patient-positioning products and the See Sharp laparoscopic cleaning and defogging device. The company expects annual sales to hit $245 million this year.
- Buying Xodus “makes sense” for Steris because it expands the company’s healthcare consumables offering with high-growth, high-margin products, Needham analysts said in a note to investors.
Dive Insight:
Steris provides hospital disinfection and sterilization equipment and services. In the most recent quarter, the company reported sales of $1.5 billion, up 7% year over year. A 9% increase in healthcare consumables revenue contributed to growth.
Xodus’ portfolio “complements and expands Steris’ offering, particularly by adding consumables used in the operating room,” Steris CEO Dan Carestio said in a statement. The acquired company has demonstrated the ability to grow at double-digit rates, the CEO added.
Steris, which aims to close the deal this year, is paying $2.1 billion for Xodus and expects to primarily finance the takeover with debt. Cash tax benefits of about $300 million will cut the net purchase price to approximately $1.8 billion, Steris said. Xodus investors could receive up to $150 million more based on performance targets in 2028.
The financial terms are reasonable, Needham analysts said. The analysts forecast that the takeover will add to Steris’ earnings per share in 2027, which will increase in 2028 and 2029.
Carestio outlined Steris’ M&A strategy last month at a Morgan Stanley event. The company is mainly interested in tuck-in deals, Carestio said. Larger M&A opportunities arise from time to time, the CEO added. When that happens, Steris is “very disciplined” about the deals it strikes, he said, focusing on technology used by hospitals, caregivers, drugmakers and medtech companies.
Buying Xodus represents a step-up in Steris’ M&A activity. In the fiscal year ending March 31, Steris completed two tuck-in acquisitions, valued at about $23.4 million, to expand its portfolio of healthcare products and services. The company completed several deals worth $54.1 million in total in the previous fiscal year. Steris’ most recent large deal was the $540 million acquisition of BD assets in 2023.
