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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited condensed combined pro forma financial data ( pro forma financial data ) combines the historical
consolidated financial positions and results of operations of STERIS plc ( STERIS ) and Cantel Medical Corp. ( Cantel ) as an acquisition by STERIS of Cantel. The transaction was announced on January 12, 2021 and provided
that each share of Cantel common stock, par value $0.10 per share ( Cantel Common Stock ), issued and outstanding immediately prior to the effective time of the Pre-Closing Merger (as defined in the
Agreement and Plan of Merger, dated as of January 12, 2021, as amended by Amendment to Agreement and Plan of Merger, dated as of March 1, 2021 (the Merger Agreement ), by and among the Cantel, STERIS and certain of their
affiliates) (other than certain shares held by Cantel) was converted into the right to receive $16.93 in cash ( Cash Consideration ) and 0.33787 STERIS ordinary shares, par value $0.001 per share ( Ordinary Shares and,
collectively with the Cash Consideration, the Merger Consideration ).
The pro forma financial data has been prepared to give
effect to the following:
The unaudited pro forma balance sheet data ( pro forma balance sheet data ) as of March 31, 2021 and the unaudited pro forma
statement of income data ( pro forma statement of income data ) for the fiscal year ended March 31, 2021 are based upon, derived from and should be read in conjunction with the historical consolidated financial statements and related
notes of STERIS for the fiscal year ended March 31, 2021 (which are available in STERIS s Annual Report on Form 10-K for the fiscal year ended March 31, 2021). The pro forma balance sheet data
and pro forma statement of income data have been prepared utilizing period ends that differ by fewer than 93 days, as permitted by Regulation S-X. Because Cantel s fiscal year end is July 31 and
STERIS s fiscal year end is March 31, the pro forma statement of income data for the fiscal year ended March 31, 2021 utilize Cantel s results of operations for the twelve months ended April 30, 2021. The consolidated
statement of income of Cantel for the four quarterly periods ended April 30, 2021 were determined by adding Cantel s unaudited condensed consolidated statement of income for the nine months ended April 30, 2021 to Cantel s
audited consolidated statement of income for the fiscal year ended July 31, 2020 and subtracting Cantel s unaudited condensed consolidated statement of income for the nine months ended April 30, 2020. The pro forma balance sheet data
utilizes Cantel s unaudited condensed consolidated balance sheet as of April 30, 2021. These values are based upon, derived from and should be read in conjunction with the historical audited financial statements of Cantel for the fiscal
year ended July 31, 2020 (which are available in Cantel s Annual Report on Form 10-K for the fiscal year ended July 31, 2020) and the historical unaudited condensed consolidated financial
statements of Cantel for the periods ended April 30, 2021, January 31, 2021 and October 31, 2020 (which are available in Cantel s Quarterly Reports on Form 10-Q for the quarterly periods
ended April 30, 2021, January 31, 2021 and October 31, 2020, respectively).
The pro forma statement of income data for the
year ended March 31, 2021 give effect to the STERIS acquisition of Cantel as if it had occurred on April 1, 2020. The pro forma balance sheet data as of March 31, 2021 gives effect to the STERIS acquisition of Cantel as if it had
occurred on March 31, 2021.
The pro forma financial data is provided for illustrative information purposes only and are not
necessarily indicative of results that actually would have occurred or that may occur in the future had the transaction been completed on the dates indicated, or the future operating results or financial position of STERIS following the transaction.
Future results may vary significantly from the results reflected because of various factors. The pro forma financial data has been prepared by STERIS
in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures About
Acquired and Disposed Businesses, as adopted by the Securities and Exchange Commission (the SEC ) on May 21, 2020.
pro forma financial data also does not consider any potential effects of changes in market conditions on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors. STERIS expects to realize annualized pre-tax cost synergies of approximately $110 million by the fourth fiscal year following the close, with approximately 50% achieved in the first two years. Cost synergies are expected to be primarily driven by
cost reductions in redundant public company and back-office overhead, commercial integration, product manufacturing, and service operations. The $110 million of pre-tax cost synergies has not been
adjusted in the pro forma financial data. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the pro forma financial data is subject to adjustment and may vary
significantly from the actual purchase price allocation that will be recorded upon completion of the transaction.
As of the date of this
filing, STERIS has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair market value of Cantel s assets to be acquired or liabilities to be assumed, other than
preliminary estimates for intangible assets, inventory and certain financial liabilities. Nor does STERIS have sufficient detail necessary to conclude that the carrying value of certain assets and liabilities approximates fair value. Accordingly,
certain Cantel assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. A final determination of the fair value of Cantel s assets and liabilities will be based on Cantel s
actual assets and liabilities as of the Closing (as defined in the Merger Agreement). Actual adjustments will be finalized within one year of the Closing and may differ from the amounts reflected in the pro forma financial data, and the differences
Based on its due diligence, STERIS did not identify any material adjustments necessary to conform Cantel s
accounting policies to those of STERIS. However, STERIS will perform a more detailed review of Cantel s accounting policies post completion. As a result of that review, differences could be identified between the accounting policies of the two
companies that, when conformed, could have a material impact on the combined financial information.
As a result of the foregoing, the
transaction accounting adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The transaction accounting adjustments have been made solely for the purpose of
providing the pro forma financial data. STERIS estimated the fair value of certain Cantel assets and liabilities based on a preliminary valuation analysis, due diligence information, information presented in Cantel s SEC filings and other
publicly available information. Prior to the transaction completion, both companies were limited in their ability to share certain information.
Within one year of the completion of the transaction, a final determination of the fair value of Cantel s assets acquired and liabilities
assumed will be performed. Any changes in the fair values of the net assets or total purchase consideration as compared with the information shown in the pro forma financial data may change the amount of the total purchase consideration allocated to
goodwill and other assets and liabilities and may impact STERIS s statement of income after effectuating the transaction. The final purchase consideration allocation may be materially different than the preliminary purchase consideration
allocation presented in the pro forma financial data.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of March 31, 2021
| Historical STERIS (as reported) | Historical Cantel (as reported April 30, 2021) | Transaction adjustments Note 3 | Note | Other Transaction adjustments Note 5 | Note | STERIS combined pro forma | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||
| Current assets | ||||||||||||||||||||||||||||
| Cash | $ | 220,531 | $ | 218,528 | (716,426 | ) | J | 960,881 | A | $ | 683,514 | |||||||||||||||||
| Accounts receivable, net | 609,406 | 164,929 | 774,335 | |||||||||||||||||||||||||
| Inventory | 315,067 | 179,078 | 62,000 | C | 556,145 | |||||||||||||||||||||||
| Income taxes receivable | 39,551 | 39,551 | ||||||||||||||||||||||||||
| Prepaid expenses and other current assets | 66,750 | 23,911 | 90,661 | |||||||||||||||||||||||||
| Total current assets | 1,211,754 | 625,997 | (654,426 | ) | 960,881 | 2,144,206 | ||||||||||||||||||||||
| Property, plant and equipment, net | 1,235,400 | 227,631 | D | 1,463,031 | ||||||||||||||||||||||||
| Lease right of use assets, net | 150,142 | 48,937 | E | 199,079 | ||||||||||||||||||||||||
| Goodwill | 3,026,049 | 666,216 | 1,536,594 | H | 5,228,859 | |||||||||||||||||||||||
| Intangible assets, net | 898,406 | 454,773 | 1,735,227 | B | 3,088,406 | |||||||||||||||||||||||
| Other assets | 52,720 | 7,724 | 60,444 | |||||||||||||||||||||||||
| Total assets | $ | 6,574,471 | $ | 2,031,278 | $ | 2,617,395 | $ | 960,881 | $ | 12,184,025 | ||||||||||||||||||
| Liabilities and shareholders equity | ||||||||||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||||||||||
| Current portion of long-term debt | $ | $ | 29,500 | $ | $ | (29,500 | ) | A | $ | |||||||||||||||||||
| Accounts payable | 156,950 | 58,950 | 215,900 | |||||||||||||||||||||||||
| Accrued income taxes | 27,561 | 5,895 | I | (3,855 | ) | A | 29,601 | |||||||||||||||||||||
| Accrued payroll and related liabilities | 150,078 | 50,554 | 200,632 | |||||||||||||||||||||||||
| Accrued expenses and other | 220,557 | 56,570 | G | 277,127 | ||||||||||||||||||||||||
| Lease obligations due within one year | 22,774 | 10,582 | E | 33,356 | ||||||||||||||||||||||||
| Other current liabilities | 30,903 | F | (5,500 | ) | A | 25,403 | ||||||||||||||||||||||
| Total current liabilities | 577,920 | 242,954 | (38,855 | ) | 782,019 | |||||||||||||||||||||||
| Noncurrent liabilities | ||||||||||||||||||||||||||||
| Long-term indebtedness | 1,650,540 | 731,759 | F | 1,005,802 | A | 3,388,101 | ||||||||||||||||||||||
| Convertible Debt | 130,316 | 37,684 | F | 168,000 | ||||||||||||||||||||||||
| Long term lease obligations | 129,673 | 41,243 | E | 170,916 | ||||||||||||||||||||||||
| Deferred income taxes | 236,860 | 51,147 | 516,282 | G | 3 855 | A | 808,144 | |||||||||||||||||||||
| Other noncurrent liabilities | 88,010 | 16,669 | F | (9,921 | ) | A | 94,758 | |||||||||||||||||||||
| Total liabilities | 2,683,003 | 1,214,088 | 553,966 | 960,881 | 5,411,938 | |||||||||||||||||||||||
| Shareholders equity | ||||||||||||||||||||||||||||
| Ordinary Shares at par | 85 | 4,697 | (4,683 | ) | I | 99 |
| Historical STERIS (as reported) | Historical Cantel (as reported April 30, 2021) | Transaction adjustments Note 3 | Note | Other Transaction adjustments Note 5 | Note | STERIS combined pro forma | ||||||||||||||||||||
| Capital in excess of par value | 2,002,740 | 285,310 | 2,595,295 | I | 4,883,345 | |||||||||||||||||||||
| Treasury shares | (71,487 | ) | 71,487 | I | ||||||||||||||||||||||
| Retained earnings | 1,939,408 | 605,984 | (605,984 | ) | I | 1,939,408 | ||||||||||||||||||||
| Accumulated other comprehensive income (loss) | (61,243 | ) | (7,314 | ) | 7,314 | I | (61,243 | ) | ||||||||||||||||||
| Shareholders equity | 3,880,990 | 817,190 | 2,063,429 | 6,761,609 | ||||||||||||||||||||||
| Noncontrolling interests | 10,478 | 10,478 | ||||||||||||||||||||||||
| Total equity | 3,891,468 | 817,190 | 2,063,429 | 6,772,087 | ||||||||||||||||||||||
| Total liabilities and equity | $ | 6,574,471 | $ | 2,031,278 | $ | 2,617,395 | $ | 960,881 | $ | 12,184,025 |
See the accompanying notes to the unaudited pro forma condensed combined financial data.
Unaudited Pro Forma Condensed Combined Statement of Income
For the Twelve Months Ended March 31, 2021
thousands, except for per share data)
| Historical STERIS (as reported) | Historical Cantel (twelve months ended April 30, 2021) | Reclassification and elimination adjustments Note 2 | Transaction adjustments Note 4 | Note | Other Transaction adjustments Note 5 | Note | STERIS combined pro forma | |||||||||||||||||||||||||
| Net revenues | $ | 3,107,519 | $ | 1,138,391 | $ | (12,953 | ) | $ | $ | $ | 4,232,957 | |||||||||||||||||||||
| Cost of revenues | 1,764,419 | 599,347 | (12,953 | ) | 63,396 | A,C | 2,414,209 | |||||||||||||||||||||||||
| Selling, general and administrative expense | 731,320 | 376,203 | (2,914 | ) | 234,686 | B,C,D | 19 557 | A,B | 1,358,852 | |||||||||||||||||||||||
| Research and development expense | 66,326 | 31,493 | 458 | C | 98,277 | |||||||||||||||||||||||||||
| Restructuring expenses | (2,914 | ) | 2,914 | |||||||||||||||||||||||||||||
| Interest expense and other, net | 30,835 | 61,902 | (7,775 | ) | A | 84,962 | ||||||||||||||||||||||||||
| Income from continuing operations before income taxes | 517,533 | 69,446 | (298,540 | ) | (11,782 | ) | 276,657 | |||||||||||||||||||||||||
| Income tax expense | 120,663 | 17,379 | (71,985 | ) | E | 5,122 | C | 71,179 | ||||||||||||||||||||||||
| Net income from continuing operations | 396,870 | $ | 52,067 | (226,555 | ) | (16,904 | ) | 205,478 | ||||||||||||||||||||||||
| Less net income for noncontrolling interests | (530 | ) | (530 | ) | ||||||||||||||||||||||||||||
| Net income from continuing operations attributable to ordinary shareholders | $ | 397,400 | $ | 52,067 | $ | $ | (226,555 | ) | $ | (16,904 | ) | $ | 206,008 | |||||||||||||||||||
| Net income from continuing operations per Ordinary Share | ||||||||||||||||||||||||||||||||
| Basic | $ | 4.66 | $ | 1.23 | $ | 2.07 | ||||||||||||||||||||||||||
| Diluted | $ | 4.63 | $ | 1.19 | $ | 2.05 | ||||||||||||||||||||||||||
| Weighted-average number of Ordinary Shares outstanding | ||||||||||||||||||||||||||||||||
| Basic | 85,203 | 42,237 | 99,500 | |||||||||||||||||||||||||||||
| Diluted | 85,898 | 43,839 | 100,322 |
See the accompanying notes to the unaudited pro forma condensed combined financial data.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(All figures reported in thousands except for per share data, unless indicated otherwise)
Note 1. Basis of Presentation
accompanying pro forma financial data and related explanatory notes were prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, as amended by the final rule, Amendments to
Financial Disclosures About Acquired and Disposed Businesses, as adopted by the SEC on May 21, 2020. The pro forma financial data has been compiled from historical consolidated financial statements prepared in accordance with generally accepted
accounting principles, and should be read in conjunction with STERIS s Annual Report on Form 10-K for the year ended March 31, 2021 and Cantel s Annual Report on Form 10-K for the year ended July 31, 2020 and the Quarterly Reports on Form 10-Q for each of the periods ended April 30, 2021, January 31, 2021 and October 31,
The pro forma financial data has been prepared to illustrate the effects of the transaction involving STERIS s subsidiaries
and Cantel under the acquisition method of accounting with STERIS treated as the acquirer. The pro forma financial data is presented for illustrative purposes only and does not necessarily indicate the financial results of STERIS after completion of
the transaction had the companies actually been combined at the beginning of the period presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of STERIS after completion of the
transaction. Under the acquisition method of accounting, the assets and liabilities of Cantel, as of the effective time of the transaction, will be recorded by STERIS at their respective fair values, and the excess of the purchase consideration over
the fair value of Cantel s net assets will be allocated to goodwill.
The transaction provides for Cantel Stockholders to receive the
Merger Consideration for each share of Cantel Common Stock they held immediately prior to the Pre-Closing Merger. Based on the low trading price of STERIS Shares on the NYSE on June 2, 2021 of $188.10,
the value of the Merger Consideration per share of Cantel Common Stock was $80.48.
The pro forma allocation of the purchase consideration
reflected in the pro forma financial data is subject to adjustment and may vary from the actual purchase consideration allocation that ultimately will be recorded. Adjustments may include, but are not limited to, changes in (i) Cantel s
balance sheet between April 30, 2021 and the June 2, 2021 completion date; (ii) total transaction related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iii) the underlying values
of assets and liabilities if market conditions differ from current assumptions.
Although no material differences were noted in the due
diligence process, the accounting policies of both STERIS and Cantel will be reviewed in detail. Upon completion of such review, additional conforming adjustments or financial statement reclassification may be necessary.
Costs related to the transaction, such as investment banker, advisory, legal, valuation and other professional fees, are not included as a
component of consideration transferred but are expensed as incurred. The impact of trade that existed between STERIS and Cantel during the pro forma periods has been adjusted in the column labeled reclassification and elimination adjustments in the
pro forma statement of income data but was not material to the pro forma balance sheet data.
The pro forma financial data does not
reflect potential cost savings, operating synergies or revenue enhancements that STERIS and Cantel may achieve as a result of the transaction, the costs to combine the operations of STERIS and Cantel or the costs necessary to achieve such potential
cost savings, operating synergies and revenue enhancements.
Note 2. Pro Forma Reclassification and Elimination Adjustments
Certain reclassifications and elimination adjustments have been recorded to adjust historical financial statements to conform to the pro forma
financial data presentation.
Revenues reported by Cantel and cost of revenues reported by STERIS of $12,953 have been eliminated from the
pro forma statement of income data based on the value of purchases made by STERIS from Cantel in the normal course of business during the year ended March 31, 2021. The impact to the pro forma balance sheet data of trade payables and
receivables was not material and has not been adjusted.
Note 3. Estimated Purchase Consideration, Allocation and Adjustments to the Unaudited Pro Forma Condensed
Combined Balance Sheet
The purchase consideration, related estimated allocations and resulting excess over fair value of net assets
acquired are as follows:
| Total Cantel Common Stock and stock equivalents | 42,316 | |||
| Exchange ratio per share | 0.33787 | |||
| Ordinary Shares to be issued to Cantel Stockholders | 14,297 | |||
| STERIS per share low trading price on June 2, 2021 | $ | 188.10 | ||
| Total value of Ordinary Shares to be issued to Cantel Stockholders | $ | 2,689,330 | ||
| Total cash consideration paid at $16.93 per share of Cantel Common Stock and stock equivalent | 716,426 | |||
| Estimated purchase consideration for Cantel Common Stock and stock equivalents | 3,405,756 | |||
| Consideration for replacement of share based compensation awards | 19,648 | |||
| Consideration for equity component of Cantel Convertible Debt | 171,641 | |||
| Total estimated purchase consideration | $ | 3,597,045 | ||
| Fair value adjustments for other intangible assets | 2,190,000 | |||
| Fair value adjustments for inventory | 62,000 | |||
| Fair value adjustments for Convertible Debt assumed | (37,684 | ) | ||
| Deferred tax impact of fair value adjustments | (516,282 | ) | ||
| Adjusted book value of net assets acquired | (303,799 | ) | ||
| Goodwill | $ | 2,202,810 |
The purchase consideration allocation and adjustments shown in the table above is based on STERIS s
estimates of the fair value of certain Cantel assets and liabilities. Once sufficient information is accessible and final valuations are performed, the purchase consideration allocation may differ materially from the estimates.
The total estimated purchase consideration for Cantel Common Stock and stock equivalents of $3,405,756 is comprised of Ordinary Shares
consideration valued at $2,689,330 and Cash Consideration of $716,426. Based on the low trading price on the New York Stock Exchange of Ordinary Shares of $188.10 on June 2, 2021, the total consideration ultimately received by Cantel
Stockholders in the First Merger (as defined in the Merger Agreement) has a value of approximately $80.48 per share of Cantel Common Stock. Additional estimated purchase consideration of $19,648 and $171,641 related to replacement share based