Nichols Institute to Acquire Oregon Lab Firm

Nichols Institute, a San Juan Capistrano operator of clinical test laboratories, said it has agreed to acquire Physicians Referral Laboratory in Portland, Ore., in a deal valued at $13.6 million.

The agreement with Physicians Referral, which performs laboratory services for health-care providers in Oregon, Washington and Alaska, calls for Nichols to make an initial $5.5-million cash payment, followed by $4.6 million in future cash payments.

Nichols will also give Physicians Referral preferred stock that can be converted into 191,700 shares of Nichols’ common stock, which would be valued at $3.5 million at current market prices. Another 92,000 shares of Nichols’ stock may be distributed depending on future operations of the firm.

Nichols’ stock closed Thursday at $18.375 per share, down 25 cents on the American Stock Exchange. The company had 4.4 million shares outstanding at the end of last year.

Nichols said it plans to merge Physicians Referral with Medlab, an Oregon testing subsidiary acquired in 1986.

Physicians Referral had 1988 revenue of about $11 million, compared to Nichols’ 1988 revenue of $90.7 million.

Nichols, which entered the business of operating general test labs by acquiring a firm in 1985, has been on a buying spree for a little more than a year, acquiring lab firms in Nebraska, South Dakota and Minnesota.

The acquisitions increased Nichols’ long-term debt to $36.1 million by the end of March, compared to only $3.4 million at the end of 1985.

The company’s long-term debt will increase another $10 million with the purchase of Physicians Referral, but Nichols said it intends to continue its growth-by-acquisition strategy.

Besides clinical labs, Nichols operates a reference laboratory in San Juan Capistrano that performs highly specialized diagnostic testing. Nichols also makes and markets medical diagnostic test kits.