Corning to Buy Medical Lab for $325 Million : Mergers: Deal with San Juan Capistrano-based Nichols Institute would create nation’s largest medical testing firm.
Moving to create the nation’s largest medical testing firm, Corning Inc. said Wednesday that it will buy the San Juan Capistrano-based Nichols Institute laboratory concern in a stock and debt deal valued at $325 million.
Analysts generally praised the deal, which they said would help both companies survive in an industry being buffeted by consolidation and government-backed efforts at controlling medical costs.
Nichols shareholders stand to reap a huge premium for their stock. Corning said its offer is equal to $13 a share, more than double Nichol’s recent trading price. In trading on the American Stock Exchange on Wednesday, Nichols shares shot up $7.19 to close at $12.
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The merger of Nichols--which has laboratories in 11 states and makes test kits for doctors’ offices and hospitals--with Corning’s Life Science unit would boost Corning into first place in the medical testing business over rival SmithKline Beecham.
Nichols, which said it had been reviewing its options, including a sale, had also held discussions with SmithKline Beecham.
“This is in the best interests of Nichols shareholders and employees,” said analyst Joseph E. Millsap of the brokerage Morgan Keegan & Co. of Memphis, Tenn. “It solves enormous problems in an industry under intense pressure.”
Randy H. Thurman, president of Corning Life Sciences in Teterboro, N.J., said Corning, N.Y.-based Corning was particularly interested in Nichols because it has labs in markets that have been outside Corning’s reach, particularly California.
He said Nichols has one of the leading laboratories to perform non-traditional, advanced testing on the cutting edge of the field.
“We see the industry in the future moving into more high-technology,” Thurman said.
Nichols Chairman Albert L. Nichols said in a telephone interview Wednesday that his company, which lost $4.4 million on revenue of $279.6 million last year, needs a new direction in light of recent trends in the industry.
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“I’m convinced the best way we can do that is to merge with Corning Life Sciences,” said Nichols, who controls about 60% of the voting power of Nichols’ common shares and who would become chairman emeritus and a board member of Corning Life Sciences after the buyout. He said that after hiring an investment banker to consider its options, the firm talked to SmithKline about being acquired.
Under the definitive agreement, Corning said, it would acquire Nichols by issuing about 6.9 million new shares valued at a total of $222 million.
In addition, Corning said it has agreed to assume more than $100 million in Nichols debt.
In New York Stock Exchange trading Wednesday, Corning shares closed at $32.37, down 50 cents.
