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Sterigenics to Pay $408 Million for Claims of Cancer-Causing Emissions

Sterigenics Agrees to Pay $408 Million to Settle Hundreds of Claims of Cancer-Causing Emissions

Private-equity-owned medical sterilization company Sterigenics has agreed to pay $408 million to settle hundreds of cases alleging that its ethylene oxide emissions caused cancer and other health problems.[1]

Sterigenics is a leading provider of medical sterilization and lab services[2] and is owned by Sotera Health, a publicly-traded company that is controlled and majority-owned by private equity firms Warburg Pincus and GTCR, which together hold 62% shares of the company.[3]

In a press release, Sotera Health said that “its subsidiaries have reached agreements to settle the more than 870 ethylene oxide (‘EO’) cases pending against Sterigenics in the Circuit Court of Cook County, Illinois, and US District Court for the Northern District of Illinois.”[4]

The lawsuits were filed in relation to Sterigenics’ Willowbrook, Illinois facility, which closed in 2019 due to its emissions.[5] The group of lawsuits alleged that the company’s emissions caused cancers, miscarriages and other health problems for people who lived and worked near the Willowbrook facility.[6]

Ethylene oxide has long been on the federal list of carcinogens, but in 2016 the Environmental Protection Agency (EPA) released conclusive evidence linking the gas to breast cancer, leukemia and lymphomas at extremely low levels of exposure, and reclassified it as a “known” carcinogen.[7] A 2019 report by the EPA found that toxic emissions from the Willowbrook Sterigenics facility were “responsible for long-term cancer risks up to 10 times higher than what the EPA considers acceptable,” according to the Chicago Tribune.[8]

Beginning in October 2016, at which point Sterigenics was aware of the ongoing investigation into ethylene oxide, Sterigenics began taking on new debt and used the proceeds of the loans to pay dividends to the Warburg Pincus and GTCR-led ownership group:[9]

  • October 2016: Sterigenics paid a $340 million debt-funded dividend to the Warburg Pincus and GTCR ownership group —57% of the company’s revenue for the year ending June 2016.[10]
  • November 2017: Sterigenics borrowed $175 million and used $28 million cash to pay a $203 million dividend to shareholders.[11]
  • July 2019: Sterigenics paid a $320 million debt-funded dividend to shareholders.[12]
  • November 2019: Sterigenics took on $2.9 billion refinancing in part to fund a $309 million dividend to the Warburg Pincus and GTCR group. Moody’s noted the company’s “high financial leverage with debt/EBITDA around 7.7 pro forma at closing” and “very aggressive financial policies given multiple debt funded dividends over the past several years.” The dividend represented approximately 40% of the company’s $770 million revenue.[13]

PESP first reported on Warburg Pincus and GTCR collecting debt-funded dividends in 2020. See our report: “Dividend Recapitalizations in Health Care: How Private Equity Raids Critical Health Care Infrastructure for Short Term Profit.”

In November 2020 Sterigenics (under the name of its parent company Sotera) went public for approximately $1.2 billion, with Warburg Pincus and GTCR staying on with controlling stakes.[14] The firms have reportedly not taken any debt-funded dividends since the company went public. Economist Eileen Appelbaum told the Atlanta Journal-Constitution in February last year that this was “no surprise.” According to Appelbaum, “Now that the company is publicly traded, the private equity firms would have to share any dividends with outside shareholders.”[15]

PESP researcher Eileen O’Grady told AJC: “The fact that private equity firms can load companies they own with debt and use that debt to pay themselves hundreds of millions of dollars in cash without making any substantial improvements to the company, it really seems like it should be illegal.” [16]

In the press release announcing the settlement, Sotera and Sterigenics “deny any liability and the agreements explicitly provide that the settlements are not to be construed as an admission of any liability or that emissions from the Willowbrook facilities ever posed any safety hazard to the surrounding communities” and note “years of biased media coverage in the greater Chicago area.”[17]

 


[1] Sun-Times/ NBC Chicago. “Sterigenics to Pay $408M to Settle Hundreds of Lawsuits Over Toxic Gas Emissions,” January 10, 2023. https://www.nbcchicago.com/news/local/sterigenics-to-pay-408-million-to-settle-hundreds-of-lawsuits-over-toxic-gas-emissions/3041216/.

[2] Sterigenics website, accessed January 17, 2023. https://sterigenics.com/.

[3] Yahoo Finance. “Sotera Health Company (SHC) Stock Major Holders.” Accessed January 11, 2023. https://finance.yahoo.com/quote/shc/holders/.

[4] “Sotera Health Settlement Press Release.” Press release, January 9, 2023. https://www.documentcloud.org/documents/23568259-sotera-health-settlement-press-release_jan-9-2023-vf.

[5] US Food and Drug Association, Ethylene Oxide Sterilization Facility Updates, accessed September 2020. https://www.fda.gov/medical-devices/general-hospital-devices-and-supplies/ethylene-oxide-sterilization-facility-updates#sterigenicsIL; Amanda Vinicky, “Illinois EPA Shuts Down Suburban Sterigenics Plant,” WTTW News, February 15, 2019. https://news.wttw.com/2019/02/15/illinois-epa-shuts-down-sterigenics-willowbrook.

[6] Steve Zalusky, “More than 600 additional lawsuits filed against Sterigenics,” Daily Herald, August 21, 2020. https://www.dailyherald.com/business/20200821/more-than-600-additional-lawsuits-filed-against-sterigenics

[7] “Evaluation of the Inhalation Carcinogenicity of Ethylene Oxide (CASRN 75-21-8) In Support of Summary Information on the Integrated Risk Information System (IRIS).” U.S. Environmental Protection Agency, December 2016. https://cfpub.epa.gov/ncea/iris/iris_documents/documents/toxreviews/1025tr.pdf. Pg. 1-1).

[8]  Michael Hawthorne, “Sterigenics created cancer risk 10 times higher than federal EPA standards in Willowbrook, new report says,” Chicago Tribune, May 31, 2019. https://www.chicagotribune.com/news/breaking/ct-met-sterigenics-epa-cancer-risks-20190529-story.html

[9] Brian Eason, “Investor payouts put Sterigenics in tenuous financial position as pressure mounts,” Atlanta Journal-Constitution, February 3, 2022. https://www.ajc.com/news/atlanta-news/investor-payouts-put-sterigenics-in-tenuous-financial-position-as-pressure-mounts/EJC5VJYEH5CINFSN24TGN5C4RI/

[10] “Moody’s downgrades Sterigenics’ CFR to B3; outlook revised to stable,” Moody’s Investor Service, October 27, 2016. https://www.moodys.com/research/Moodys-downgrades-Sterigenics-CFR-to-B3-outlook-revised-to-stable–PR_357167

[11] “Moody’s affirms Sotera Health’s ratings (CFR at B3),” Moody’s Investor Service, November 27, 2017. https://www.moodys.com/research/Moodys-affirms-Sotera-Healths-ratings-CFR-at-B3–PR_375755

[12] Pitchbook. Accessed September 2020.; “Moody’s affirms Sotera’s B3 Corporate Family Rating, downgrades senior unsecured rating to Caa2,” Moody’s Investor Service, July 16, 2019.  https://www.moodys.com/research/Moodys-affirms-Soteras-B3-Corporate-Family-Rating-downgrades-senior-unsecured–PR_405042; Shawn Collins, “Sterigenics Funnels $1.3 Billion in Cash to Shareholders as Victims’ Claims Grow,” The Collins Law Firm press release, February 4, 2020. https://www.collinslaw.com/blog/sterigenics-funnels-1-3-billion-in-cash-to-shareholders-as-victims-claims-grow/

[13] “Moody’s affirms Sotera’s B3 CFR following proposed refinancing and shareholder distribution,” Moody’s Investor Service, November 12, 2019. https://www.moodys.com/research/Moodys-affirms-Soteras-B3-CFR-following-proposed-refinancing-and-shareholder–PR_413204

[14] Sotera Health. “Sotera Health Announces Closing of Initial Public Offering,” November 24, 2020. https://investors.soterahealth.com/news-releases/news-release-details/sotera-health-announces-closing-initial-public-offering/. ; Sotera Health SEC Form 10-K for the fiscal year ended December 31, 2020, https://investors.soterahealth.com/node/7231/html. Pg. 42.

[15] Brian Eason, “Investor payouts put Sterigenics in tenuous financial position as pressure mounts,” Atlanta Journal-Constitution, February 3, 2022. https://www.ajc.com/news/atlanta-news/investor-payouts-put-sterigenics-in-tenuous-financial-position-as-pressure-mounts/EJC5VJYEH5CINFSN24TGN5C4RI/

[16] Brian Eason, “Investor payouts put Sterigenics in tenuous financial position as pressure mounts,” Atlanta Journal-Constitution, February 3, 2022. https://www.ajc.com/news/atlanta-news/investor-payouts-put-sterigenics-in-tenuous-financial-position-as-pressure-mounts/EJC5VJYEH5CINFSN24TGN5C4RI/

[17] “Sotera Health Settlement Press Release.” Press release, January 9, 2023. https://www.documentcloud.org/documents/23568259-sotera-health-settlement-press-release_jan-9-2023-vf.

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