STERIS Corporation has announced the purchase of privately-owned Spectrum Surgical Instruments and Total Repair Express, leading providers of surgical instrument repair services and instrument care products. These two businesses will be integrated into STERIS's Healthcare segment as part of the company's Specialty Services business.
The market for outsourced surgical instrument repair has emerged as an opportunity for healthcare facilities to more efficiently manage operating costs. The surgical instrument repair industry is fragmented with many local and regional competitors, as well as that done by hospitals themselves. The amount of business outsourced today is estimated to be over $500 million in the U.S., and growing.
Spectrum is headquartered in Ohio, and TRE is headquartered in New Jersey. Their core business is the repair of a wide variety of surgical instruments and other hospital equipment, both on-site at hospital premises and at central repair facilities. The primary services offered include inspection, cleaning, lubrication and repair of reusable surgical instruments such as forceps, retractors and scissors. Typical contracts involve regular servicing of instruments in the surgical suite of hospitals, and may involve daily or weekly interaction with hospital sterile processing center personnel at client facilities. By contrast, STERIS's current Service business is primarily focused on the installation, maintenance and repair of the company's capital equipment in healthcare facilities.
STERIS acquired Spectrum and TRE for approximately $110 million, including contingent consideration. In calendar 2012, the combined businesses are anticipated to generate revenue of approximately $72 million and operating income of approximately $7 million. After adjusting for depreciation and amortization, shareholder expenses and other non-recurring items, adjusted operating income for the combined businesses is anticipated to be approximately $11 million for the same period.