Medical-waste firm Stericycle explores sale of business unit

  • Stericycle unit likely to bring single-digit Ebitda multiple
  • CRS: medical-product-recall services, patient-physician communications, call centers
  • Stericycle set business-transformation initiative

Stericycle is exploring the sale of its communication and related services arm, according to people with knowledge of the matter.

The Lake Forest, Illinois, medical-waste management and compliance company has turned to JP Morgan for financial advice on a process, the people said. Financial sponsors submitted first-round bids for the business unit in early April, they said.

The process for CRS comes as Stericycle, led by CEO Charles Alutto, undergoes its previously announced business-transformation program.

Looking to address lackluster financial results, the company unveiled the multiyear plan in its November Q3 earnings report as an effort to fuel operational efficiencies and earnings growth.

The plan includes an initiative to rationalize the company’s portfolio, partly by focusing on core services as it divests or exits non-strategic service lines and markets.

Stericycle’s CRS division comprises two businesses, the people said: global communication services and global recall services.

That includes the management of medical-product recalls and returns, as well as associated communication services. Other services help improve communication between physicians and patients via its call centers, automated reminders and online appointment scheduling, among other services.

The combined businesses account for roughly $375 million and $70 million of revenue and Ebitda, the people said. CRS ought to trade for a multiple of Ebitda in the mid-to-high single digits, they added.

Perhaps hinting that CRS was among non-core lines of business, Stericycle executives on a February quarterly call blamed a record event within its CRS business in Q4 2016 for offsetting strong growth within its secure information destruction business. Hurricanes and cost pressure in Latin America have also weighed on the company, the company has said.

Founded in 1989 as a regulated medical-waste company, Stericycle has since expanded into other business-to-business segments, largely through an aggressive M&A strategy.

Today Stericycle’s umbrella of offerings includes regulated medical-waste-management services and compliance-training programs, and products and services focused on secure information destruction and brand protection, as well as those concentrated on environmental issues while managing hazardous waste disposal.

Among recent notable purchases, Stericycle in 2015 forked out $2.3 billion for Shred-It, through which it added its document-destruction services.

Shares of Stericycle, whose market cap lies just north of $5.2 billion, have retreated nearly 30 percent over the past 12 months.

Representatives of Stericycle and JPMorgan didn’t return requests for comment.

Action Item: Reach out to Stericycle Investor Relations at 1-847-607-2012

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