"The Dark Index"

Laboratory Merger & Acquisitions Saw Several Deals during 2009

Sonic and LabCorp remain opportunistic buyers, some pathology groups tap private equity capital

CONSOLIDATION OF INDEPENDENT CLINICAL LABORATORIES continued during 2009. The most active acquirer was Sonic Healthcare, Ltd., of Sydney, Australia. It purchased three laboratories in the United States this year.

Just this month, Sonic acquired East Side Clinical Laboratory in Providence, Rhode Island. This acquisition gives Sonic a presence in New England. East Side was founded in 1949 and has a strong market share in Rhode Island. With annual revenue of about $30 million, assuming a 20% EBITDA (earnings before interest, taxes, depreciation, and amortization) and a multiple of five to eight, the sales price probably ranged between $30 million and as high as $48 million.

In August, Sonic acquired Piedmont Medical Labs of Winchester, Virginia. This was a lab company owned by Valley Health. Annual revenue at Piedmont is about $11 million. Sonic intends to integrate Piedmont Medical Labs with its existing laboratory business in Chantilly, Virginia. Sonic Healthcare’s first 2009 acquisition in the United States was in the spring and involved Axiom Laboratories of Tampa, Florida. This laboratory has about $5 million in annual revenue.

LabCorp Acquires Centrex

In November, Laboratory Corporation of America of Burlington, North Carolina, served notice that it was still a buyer of clinical laboratories by purchasing Centrex Clinical Laboratories, Inc., in New Hartford, New York. Founded in 1969, Centrex was owned by Faxton-St. Luke’s Healthcare. The sales price was not announced but Faxton-St. Luke’s reported that Centrex Clinical Labs had $43 million in revenue last year. This sup- ports a sales price ranging from about $43 million to $77 million, based on cash flow and recent rates of growth.

Pathology Labs Raise Money

Merger and acquisition activity in the anatomic pathology sector was rather limited. One transaction with a high profile was the acquisition of pathology supergroup UniPath, LLC, in Denver, Colorado, by American Pathology Partners, of Brentwood, Tennessee (APP). No sales price was announced. (See TDR, February 2, 2009.)

One interesting dimension to this transaction was the pathology owners of UniPath only sold the histology laboratory operations to APP. UniPath retained full ownership of its pathology professional corporation and has an agreement to provide professional services to APP.

In another transaction, Pathology Inc., a multi-specialty pathology services company in Southern California, accepted an equity investment. England Securities served as the financial advisor to an investment group that included ABS Capital Partners, Mt. Weather Capital, and Orix Venture Finance.

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