Silverfleet Capital

Sterigenics

Business overview

Sterigenics, headquartered in Oak Brook, Illinois, delivers contract sterilisation and ionisation services to the medical device and pharmaceutical industries using ethylene oxide, gamma radiation and electron beam radiation modalities. In addition to sterilising medical devices and other medical products, Sterigenics is also active in the fields of food safety and the modification of high performance and specialty materials such as semiconductors and polymers. Sterigenics has over 1,300 employees and operates from 38 service centres around the world.

Investment rationale

Silverfleet Capital led the primary buyout of Sterigenics in June 2004 for $311.5 million; the company was then a major division of a Belgian listed company. We believed that the market was underserved and that there was an expansion opportunity for a high quality sterilisation provider in both new and existing regions, notably in the fast-growing Chinese market.

In addition, we saw an opportunity to address certain operational deficiencies, both in the strategic development of the business, as well as an underinvestment in certain operational areas, specifically process information monitoring and reporting.

Value creation

Following our acquisition, the company built three large, new facilities; two ethylene oxide service centres located in Shanghai, China and Wiesbaden, Germany, and an electron beam service centre also located in Shanghai, China. In addition, Sterigenics expanded its operations in the United States, Mexico, France, Belgium and the United Kingdom. Overall in excess of $100 million was invested to increase the processing capacity of the business, which was a key driver in the strong 75% growth in earnings over the period of our ownership.

Alongside our investment in production capacity, we sought to address the operational issues, where we worked with management to reorganise the management structure. Central to the success of this restructure was our appointment of a highly experienced chairman, John Kane, to provide industry expertise and guidance for the management team. With an effective management structure in place, significant investment was made in the company’s operations including the multi-million dollar implementation of a new global, plant level IT system.

Outcome

Under Silverfleet Capital’s ownership, Sterigenics performed extremely well, almost doubling EBITDA. Together with a co-investor, we invested $117 million in the company in 2004, in November 2006 a dividend recapitalisation returned $75 million to investors, and in March 2011 the company was sold in a secondary buyout for $675 million.