1. MERGERS AND ACQUISITIONS IN THE IRRADIATION INDUSTRY
Yves Henon, Asiaster Pte Ltd

2. Please allow me to start by saying that the views expressed in this presentation are personal views and not the views of any organization.
Mergers and Acquisitions are not new in the irradiation industry but their pace and magnitude over the recent past has been spectacular.

3. New to irradiation business Greenfield + Acquisitions
The interesting case of Isotron
ISOTRON - UK
1983: 1+1 = 2 irradiators
2007: SYNERGY HEALTH PLC
New to irradiation business
1985: PLC
GROWTH
Greenfield + Acquisitions
GAMMASTER
2002
EBIS Iotron
2005
Vintech EB
1990
I think that a company is an interesting example of what happened … Surprise Surprise A big fish that came from nowhere

4. Sterilgamma - Malaysia
2011
SYNERGY HEALTH PLC
Leoni Studer - Switz.
2012
GSP - Germany 2010
Bioster - Italy 2014
BeamOne – USA
2011
A couple of years after having absorbed Isotron …. Synergy Health Plc developed a taste for acquisitions
12 countries – 29 sites 18 Gamma – 12 EB – 13 EO

5. Initially mostly greenfield expansion
USA - Thailand – China
STERIGENICS
Est Successively owned by
IBA (1999), Silverfleet (2004), GTCR (2011 for $675M)
FITS - USA
2014
Gammarad - Italy 2014
The pattern for Sterigenics (# 1) was somewhat different
11 countries – 44 sites 18 Gamma – 4 EB – 17 EO

6. Immediate revenue through access to an established market
Advantage of mergers and acquisitions over greenfield investment
Immediate revenue through access to an established market
Licenses for gamma plants exist
Competent personnel in place
Acquisition of new technology / know-how
Risks
Acquisition of the company’s problems also
Bad surprises possible
Price might be too high
Difficulties to integrate different company cultures, IT systems, QA systems

7. In 2014 mergers and acquisitions changed the landscape of contract radiation processing

8. Sterigenics enters in a definitive agreement to acquire Nordion
Mars 29, 2014
Sterigenics enters in a definitive agreement to acquire Nordion
$826M
Major and critical supplier of
After my cup of coffee when I opened my favorite website on 29 March 2009, I was in for a surprise….. 5th May 2014, other surprise
May 5, 2014
REVISS Services (UK) Ltd announces plans to cease trading

9. Some were not amused…… Interesting to see the reaction of Synegy Health shortly after CLICK

10. + = October 13, 2014 Steris to acquire Synergy Health
$1.9 Bn
$2.6 billion in annual revenues
14,000 employees in 60 countries + =
Acquisition or merger ?
Incidentally, acquisition or merger ? Steris website – Synergy website Shows once more that the US and the UK are separated by a common language

11. Cobalt-60 demand balance between the 3 top contractors
= 19 GAMMA SITES
= 30 GAMMA SITES
Does not change regulatory pressures on the use and transportation of cobalt-60
Cobalt-60 demand balance between the 3 top contractors

12. PRIVATE EQUITY FIRMS PUBLIC COMPANIES
MOM & POP’S IRRADIATOR
24 / 7
It seems that in N. Amreica and Europe we are witnessing the end of an era ? Good bye old mom and pop’s irradiators ! Hello PE firms and PLCs !

13. Source: Synergy Health Annual Report 2014
Source: GTCR website
Source: Reuters 22 October 2014
It is interesting to listen to the way they speak shareholder value…

14. MORE PROFIT Grow volumes Grow margins Increase number of centres
+ Eliminate competition
Increase prices
Control cost
Surf on the wave of the healthcare business
Limit cobalt-60 price increase
My English is not that sophisticated but I think that what they mean is « we want more profit » Grow margins The Feeling that the price of the service is too low
Economy of scale

15. Mergers and acquisitions in China
Limited in number and size
Beijing Research Centre for Radiation Applications acquired HYSF in 2008
Okoic built 2 units and acquired 2 before selling all 4 in 2013/14
CNNC acquired irradiators Suzhou and Zhanjagang
One example of vertical integration
The China Isotope and Radiation Corporation (CNNC) owns 8 gamma irradiators and one accelerator (7 locations), the national cobalt-60 supplier (Tongxin) and a gamma irradiator manufacturer (BINE)
All recent attempts by foreign companies to acquire Chinese operators failed.

16. Multiplicity of players
Greenfield investment the preferred approach
Market leader Zhongjin has 10 gamma irradiators in 6 locations and is building 2 more in 2 locations.
Price of service is low. Why so few acquisitions ?
Multiplicity of players
Small size and low profitability make them unattractive targets
Not difficult to get a gamma license
Relatively low price of gamma and EB equipment

17. India radiation processing market
Small and scattered
Large predominance of in-house ethylene oxide for medical sterilization
Low price of service
Acquisitions unattractive
Small size and low profitability of players
Greenfield investment dominant approach
Low price of gamma irradiators and cobalt-60
Ease to get a gamma license
Constructions of gamma irradiators subsidised by government

18. What do mergers and acquisitions bring to users ?
PROS ?
…a single contractor worldwide, a unified QA system, backup….
CONS
LESS CHOICE
PRICE OF SERVICE LIKELY TO INCREASE MORE / FASTER
RISK TO PUSH USERS TOWARDS IN-HOUSE SOLUTIONS

19. Final thought: for some OF THE employees of the acquired companies
« And you promise to treat all our employees under the laws of the Geneva Convention ? »