Corning Unit Agrees to Buy Nichols Institute : Acquisition: It will take over the San Juan Capistrano medical testing company in a stock and debt deal valued at $325 million.
Nichols Institute, a medical testing company with facilities in 11 states, said Wednesday that it is being acquired by a Corning Inc. subsidiary for $13 a share, more than double its recent trading price, 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.
Corning, through its Life Sciences unit, would become the largest player in the testing lab business over rival SmithKline Beecham. For 1993, Corning’s combined laboratory services revenues exceeded $1.3 billion.
Not only will the acquisition give Corning an instant presence in the West Coast market for routine medical testing, but it also provides it with Nichols’ esoteric testing laboratory in San Juan Capistrano--one of the most advanced in the nation for diagnosing rare diseases and other abnormal medical conditions.
Corning said it plans to pay the equivalent of $13 for each share of Nichols stock by issuing about 6.9 million new shares for a total of about $222 million. In addition, Corning has agreed to assume more than $100 million in Nichols debt.
Nichols stock closed at $12, a gain of $7.19 a share in trading Wednesday on the American Stock Exchange. Corning, which is based in Corning, N.Y., closed at $32.37, down 50 cents a share, on the New York Stock Exchange.
“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.”
Nichols Institute began 23 ago and has grown into a major manufacturer of kits that allow doctors and hospitals to perform routine medical tests and a provider of regional laboratory services. It has about 3,500 employees, including nearly 1,000 at its San Juan Capistrano headquarters. All employees are expected to be retained under the acquisition, Nichols and Corning officials said.
The esoteric laboratory staff could grow as Corning increases the number of tests it performs at the specialized laboratory.
Nichols Chairman Albert L. Nichols said in a telephone interview Wednesday that his company, which lost $4.4 million on revenues of $279.6 million last year, needed a new direction in light of recent trends in the industry.
“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. Nichols will become chairman emeritus and a board member of Corning Life Sciences after the buyout. After hiring an investment banker to consider its options, he said, the firm had talked to SmithKline about being acquired.
The new chief executive of the Corning Nichols Institute, as it is slated to become, is yet to be identified. The acquisition is expected to be completed in about 90 days.
Randy H. Thurman, president of Corning Life Sciences in Teterboro, N.J., said that Nichols will be a splendid fit and position the unit for the future.
“We see the industry in the future moving into more high technology,” said Thurman, adding that he considered Nichols undervalued as a takeover opportunity.
“They were trading bare-bones on their earnings. They should have been perceived as a great takeover” target, he said.
Last year, Corning acquired another laboratory company, Damon Corp., in a deal worth about $575 million.
Nichols Stock Shock
Nichols Institute’s stock price more than doubled after Wednesday’s announcement that it is being acquired by a Corning Inc. subsidiary. Monthly closing prices:
1993 June: $6.375 July: 6.75 Aug.: 5.375 Sept.: 6.00 Oct.: 7.00 Nov.: 5.625 Dec.: 6.125 1994 Jan.: 5.25 Feb.: 5.00 Mar.: 5.125 April: 4.8125 May: 4.8125
Wednesday’s close: $12.00
Source: Dow Jones; Researched by JANICE L. JONES / Los Angeles Times
