One of the major equity stories this week was not one out of the industries for which Canada is generally known – that is, resource-based sectors such as gold, silver, copper, or lumber. But given Canada’s pioneering achievements in socializing medicine, and in finding cures and treatments to which millions owe their lives and well-being, it should come as no real surprise on the eve of Canada Day that the spotlight is being shone on a health-care company.
In this, the last week of June, Mississauga, Ontario-based CML HealthCare Inc. (TSX: CLC) entered into an arrangement with a newly-formed Ontario corporation set up by LifeLabs Inc., with the aim of purchasing CML. The deal, valued at $1.2 billion, includes millions of dollars in CML debt and represents a per-share cost to LifeLabs of $10.75 – or a 49.3% premium to CML’s closing price on Monday. CML shareholders have the summer to mull over the proposed deal before voting on it the day after Labour Day.
"For over 40 years," according to the company website, "CML HealthCare has been an essential part of Canadian diagnostic medicine."
From a single lab in Simcoe, Ontario, the company has grown into a behemoth that operates more than 200 lab and diagnostic imaging sites in Ontario and British Columbia, processing over 40 million tests every year.
CML also claims to offer a mix of digital and analog imaging services in X-ray, ultrasound, mammography, bone density, MRI, CT, and nuclear medicine.
Its suitor reckons that the combination will "expand community lab testing for Ontario patients. LifeLabs and CML provide laboratory testing services that help Ontario health-care providers diagnose, treat, monitor and prevent disease in patients."
LifeLabs delivers more than 50 million lab tests, serving more than 11 million patients, and 26,000 health-care providers. LifeLabs is indirectly owned by OMERS Administration Corporation, an acronym for Ontario Municipal Employees Retirement System, a pension fund geared to handling the retirement benefits of local government workers in Canada’s most populous province. As of 2011, OMERS boasted total assets topping $55 billion.
In a highly volatile week, CML stock closed Friday at $10.56, an improvement of eight cents over the previous day’s close. The stock price hit a 52-week high of $10.65 on word of the deal, or nearly double its 52-week low of $5.42, set back in November.
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