A deal to sell Kanata-based Nordion (TSX:NDN, NYSE:NDX) to a U.S. sterilization provider will flood the combined company with some much-needed cash to develop its products, company executives said Monday.
Steve West, the CEO of Nordion, said the deal to sell the company to Illinois-based Sterigenics for US $727 million will give the new firm more money to work with in what is a very capital-intensive business.
It “creates a business that, in terms of its size, also has some critical mass,” he said in a conference call with investors Monday morning.
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Mr. West said the two companies are a good fit and there won’t be a lot of overlap in what they do.
“I’ve always felt that it was somewhat intuitive…that our sterilization technologies would benefit from this kind of arrangement,” he said.
“I think the offering that we’ll be able to give our current customers and the offering that Sterigenics will be able to give their customers will demonstrate the combined knowledge that we have around customer needs,” he added.
The company will continue operating as a standalone business under the Nordion name, said Mr. West. It will also stay in Canada and continue to headquarter its operations in Ottawa.
He expected the deal to close sometime in the second half of 2014. It will also need to receive the approval of Nordion shareholders and meet the terms of the federal government’s Investment Canada Act.
Sterigenics said it’s primarily interested in the deal as a means of securing a stable long-term source of Cobalt-60 that will help to grow its gamma sterilization market.
“In the short term, Nordion customers should expect business as usual,” said Michael Mulhern, CEO of Sterigenics, in a statement. “Over the long run, we look forward to working with existing and new reactor partners to create a larger and more reliable supply of Cobalt-60 for the future.”
Sterigenics, which is a portfolio company of Chicago-based equity firm GTCR LLC, will fund the sale using new debt facilities and equity financing, its cash on hand and Nordion’s cash on hand.
Markets reacted favourably to news of the deal on Monday. Nordion’s share price was up $1.22 to $12.74 on the TSX by mid-morning.
The sale brings to an end Nordion’s strategic review, which it first announced in January 2013.
Last May, the company sold its TheraSphere technology to a healthcare company in the United Kingdom for $200 million.
That one-time revenue bump helped push the company back into profitability during results that were announced in January. It came after profits saw sharp year-over-year declines during most of 2013.
The company was also going to have to find a new supplier of isotopes.
Atomic Energy of Canada Ltd. had agreed to supply them until 2016 but after that they would be looking for a new source – a search that Mr. West said would not necessarily be easy.
Shareholders will receive US$11.75 per share, according to a press release.
The stock price was at $10.41 on the NYSE and $11.52 on the TSX at the end of trading on Friday.
