LABS, article from the heartland
LabOne buys Olathe rival Osborn Group
By SUZANNE KING - The Kansas City Star
Date: 08/31/01 22:15
Lenexa-based LabOne Inc. has acquired Osborn Group Inc., an Olathe competitor, for $49 million in cash.
LabOne officials said Friday the acquisition would allow the company to save $5 million to $10 million a year by eliminating operational overlap.
Osborn's clients, many of whom were not LabOne customers, will help the company make better use of laboratory space, said John McCarty, LabOne's executive vice president and chief financial officer.
"We see this as a wonderful opportunity to grow and expand," McCarty said.
With the acquisition of Osborn, LabOne will have annual revenue of $250 million and will perform laboratory testing -- including risk assessment, health-care and substance-abuse testing -- for 10 million people each year.
The company financed the acquisition through a $50 million equity and debt investment by the New York firm Welsh, Carson, Anderson & Stowe.
If shareholders approve the deal, Welsh Carson will hold about 29 percent of LabOne's outside equity and will gain two seats on an expanded seven-member board. Welsh Carson also will nominate a third board member for shareholder approval.
Under the deal, LabOne will have three board members, and a seventh member will be agreed upon by the board.
Welsh Carson will maintain a right of first refusal to invest an additional $30 million in LabOne to fund future acquisitions.
LabOne's stock closed Friday at $9.25, up 35 cents.
The testing done in Osborn's Olathe laboratory will be transferred to LabOne's 3-year-old Lenexa facility, McCarty said. He said LabOne would try to find jobs for all of Osborn's 300 employees, but he acknowledged there probably would be job cuts.
McCarty said some Osborn employees had been placed on transitional status and would be evaluated. Many will be hired to fill open positions at LabOne, he said.
"The Osborn employees are trying to digest this," McCarty said. "...We're certainly trying to give them assurances that they're no longer a competitor, but they're part of our family."
Osborn, which specializes in risk-assessment services to the life insurance market, was owned by ChoicePoint, a Georgia company that provides credential verification and identification services, such as pre-employment background screening.
ChoicePoint had been expected to sell Osborn because the Olathe firm was the only business remaining in the company's life and health insurance business group.
"We're trying to focus primarily on data or technology-intensive products in fast-growing markets," said James Lee, a ChoicePoint spokesman.
Osborn was founded by James Osborn, who also founded the company that became LabOne.
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