Venture-backed US Pathology Labs Inc., known as US Labs, has spurned Wall Street for a big suitor.
The Irvine-based company agreed to be bought for $155 million by Burlington, N.C.-based Laboratory Corporation of America Holdings, one of the biggest operators of labs.
The deal is set to close in the first quarter, subject to approval by regulators and US Labs’ shareholders.
US Labs specializes in cancer testing. It provides diagnostic, prognostic and predictive cancer testing to hospitals, doctors and surgery centers.
The company had been considering a public stock offering.
“We were starting to interview investment bankers,” said US Labs’ Chief Executive R. Judd Jessup. “Basically, LabCorp gave us a call and said, ‘We’d really be interested in talking about a combination.'”
The “fairly lukewarm” market for initial public offerings and LabCorp’s cash offer played into the decision to sell, Jessup said.
LabCorp is expected to run US Labs as a separate unit. It’s likely to keep the US Labs’ name, said Jessup, who plans to stay on as president of the local operation.
LabCorp made a similar buy in 2003 when it acquired cancer testing laboratory Dianon Systems Inc.
The publicly traded company posted sales of $2.3 billion for the first nine months of 2004. It has more than 23,000 workers. LabCorp’s tests range from blood analyses to HIV and genomic testing.
“They have many more managed care contracts than we do, so that has the potential of increasing our test volume,” Jessup said.
Founded in 1997, US Labs has raised some $48 million in venture funds. Investors include Baltimore’s ABS Capital Partners, Boston’s Highland Capital Partners, and Accel Partners and Patricof & Co. Ventures Inc., both of Palo Alto.
US Labs counts 430 workers, including 370 in Orange County. The Business Journal estimates its annual sales are $80 million.
Besides boosting its holdings, LabCorp Chief Executive Tom Mac Mahon said that the deal “provides LabCorp the opportunity to perform other esoteric and genomic tests in US Labs’ California facility, a key strategic need to our organization.”
Jessup said LabCorp plans to grow the Irvine lab and offer tests that it doesn’t do now.
“So I suspect we’ll be increasing our workforce over time,” he said.
Jessup became US Labs’ interim chief in 2002, later taking the permanent job. He replaced Michael Danzi, a US Labs founder, in the top role.
“The board began to look at the financial results of the company and decided that it was time to put in more of an operating person at the CEO level,” Jessup said at the time of his appointment.
LabCorp’s competitors include Teterboro, N.J.-based Quest Diagnostics Inc., which operates the Nichols Institute near San Juan Capistrano, and Specialty Laboratories Inc., a smaller company based in Santa Monica.
