Wall Street staged a strong welcome for Unilab Corp.'s return to the public market, as investors bid up the Tarzana-based company's stock price by 44% on its first trading day Wednesday. The stock, priced at $16, closed at $23.
Unilab, the dominant provider of laboratory-testing services to physicians, managed-care groups and hospitals in California, sold 6.7 million shares in its initial public offering, raising $107.2 million. The money will be used to help the company pay down debt.
The IPO returned the company to the public sector less than two years after it was taken private by an investment company.
"The industry dynamic has changed dramatically over the past year and a half," said Brian D. Urban, Unilab's executive vice president and chief financial officer. "While that may seem like a short time, we thought it was a good time to come back public."
The company trades under ticker symbol ULAB on Nasdaq. The offering was led by Salomon Smith Barney and Credit Suisse First Boston.
Analysts said Unilab, which conducts tests on about 45,000 patients each business day and has more than 3,500 employees, benefited from both its size and sector.
"It's hard to say this [the success of the IPO] is reflective of overall health care, which has been mixed," said Benner Ulrich of UBS Warburg. "But health-care services, which would include Unilab, has been doing well. In general, we remain bullish on the laboratory industry."
Analysts noted that Santa Monica-based Specialty Laboratories Inc. had a "hugely successful" IPO when it went public in December with an opening-day price of $16. The company, which handles highly specialized laboratory tests, hit a 52-week high Wednesday, closing at $43.
That IPO and the Unilab offering suggest that there is an appetite among investors for smaller, profitable companies with a record of growth, analysts said.
For the first quarter, Unilab's revenue rose 20% to $95.3 million from $79.3 million a year earlier.
For 2000, Unilab had net income of $41.5 million on revenue of $337.5 million, compared with a net loss of $13.9 million on $285.1 million in revenue for the prior year.
Urban said the company was "thrilled," but not surprised at Wall Street's response Wednesday. He noted there was substantial interest among institutional investors.
A large chunk of the proceeds will be used to pay down the company's $309-million debt load, accumulated in part because of an aggressive acquisition campaign.
Unilab is still in negotiations with the Justice Department over concerns raised about past billing practices. Urban said the Justice Department recently offered to settle the matter for $2.8 million. "We're considering it," Urban said. "The discussions are ongoing."