U.S. sues to block merger of Steris Corp, Synergy Health

(Incorporates earlier statements from companies, adds background)

By Diane Bartz

WASHINGTON, May 29 (Reuters) - The U.S. Federal Trade Commission filed a lawsuit on Friday aimed at stopping the $1.9 billion merger of medical technology provider Steris Corp and British sterilization services provider Synergy Health Plc, according to the agency, which enforces antitrust law.

Synergy Health and Steris, both of which provide contract sterilization services using radiation for medical devices, said they would fight the FTC and that they were confident they would prevail.

"We are very disappointed by the FTC's decision to impede this transaction and intend to vigorously challenge their claims in court," Synergy Health Chief Executive Richard Steeves said in a statement.

Synergy shares fell as much as 6.2 percent in early trading, making it the top loser on the FTSE-250 Midcap Index on Friday morning. Shares of Steris were down about one percent in early morning trading on the New York Stock Exchange.

Shares of both companies have fallen in recent days on doubts of the deal going through.

The FTC said that the deal would hurt Synergy's and Steris' customers by eliminating "likely future competition between Steris's gamma sterilization facilities and Synergy's planned x-ray sterilization facilities in the United States."

This deal is one of several inversion deals in which U.S. companies seek to reincorporate overseas to get lower tax rates. The plan is for Cleveland-based Steris to buy out UK-based Synergy Health Plc, with the combined company managed from Ohio but incorporated in Britain.

A number of inversion deals have come undone in the past few months after the U.S. Treasury Department tightened rules.

Synergy and Steris, however, showed no sign of giving up and said on Friday that they planned to extend the completion date to Dec. 31.

Steris announced the deal in October, saying it wanted to expand its footprint in Europe. At the time, it said the new company was expected to have a combined revenue of about $2.6 billion and employ about 14,000 people in 60 countries.

(Reporting by Diane Bartz in Washington and Roshni Menon in Bangalore; Editing by Susan Heavey)

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