Unilab Agrees to Be Bought by Kelso for $420 Million

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.

Unilab shares on Tuesday rose 44 cents to close at $5.31 on the American Stock Exchange.

Unilab provides clinical testing services to doctors, hospitals and other health-care providers.