NEW YORK (GenomeWeb News) – Laboratory Corporation of America has signed a definitive agreement to purchase Orchid Cellmark for $85.4 million, the two firms announced today.
Under the terms of the deal, LabCorp will purchase 30.5 million outstanding shares of Orchid Cellmark, including options, at $2.80 per share. Less Orchid Cellmark's cash and cash equivalents, and available for sale securities as of Dec. 31, 2010, the price of the deal is about $65.6 million.
In a statement, the companies said the deal strengthens LabCorp's presence and brand name in identity testing in the US and establishes a presence in identity testing in the UK.
"The proposed acquisition of Orchid Cellmark significantly diversifies and strengthens our specialized forensic and family relationship testing," David King, chairman and CEO of LabCorp, said in a statement.
Labcorp has created an acquisition subsidiary, OCM Acquisition, which will commence a tender offer to purchase all outstanding shares of Orchid Cellmark. After the completion of the tender offer, LabCorp expects to consummate a merger of OCM Acquisition and Orchid Cellmark. At that time shares of Orchid Cellmark that have not been purchased in the tender offer will be converted into the right to receive the same cash price per share as paid in the tender offer, the two companies said.
Orchid Cellmark's board has approved the deal, which is expected to close in the second quarter.
News of the proposed deal drove shares of the company's stock up 38 percent to $2.77 on Nasdaq in early morning trading today.
The purchase is the second by LabCorp since the summer when it announced the acquisition of Genzyme Genetics for $925 million in an all-cash deal.
Based in Princeton, NJ, Orchid Cellmark provides DNA testing services mainly for forensic and family relationship applications. In 2010, it recorded revenues of $63.7 million, an 8 percent increase over $59.1 million in 2009 with business especially fruitful in the UK, which offset softness in its US operations.
In the past few months, the company has secured a number of contracts with UK agencies for its DNA testing services, while its US operations underwent revisions in January 2010 as a result of the consolidation of its US forensics business into its Dallas, Texas facility and its paternity business into its Dayton, Ohio facility. Thomas Bologna, Orchid Cellmark's CEO, said during the company's fourth-quarter and full-year 2010 earnings conference call that the moves would "continue to favorably impact our US results" in 2011.
It was unclear if Bologna would have any role with LabCorp following closure of the deal.