Unilab Corp., California's biggest clinical laboratory testing company, agreed Tuesday to be acquired by closely held Kelso & Co. for about $420 million in cash and debt.
Kelso, an investment company, will own about 93% of Unilab shares, buying them for $5.85 each in cash, a 20% premium to Monday's closing price of $4.88. Other shareholders will hold the remaining 7%.
Fierce competition in the California clinical testing industry during the 1990s forced some companies into bankruptcy. Now, with fewer rivals, Tarzana-based Unilab is able to charge higher prices, helping to boost the company's earnings and share price. The purchase will give shareholders a better return than Unilab has provided, analysts said.
"This is a company that's kind of back from the dead in an industry that's kind of back from the dead," said Nancy Weaver, a Stephens Inc. analyst. "It's a lower-risk strategy for management."
