Earlier today, Sonic Healthcare, Ltd. of Sydney, Australia, announced the acquisition of Clinical Laboratories of Hawaii LLC (CLH), based outside Honolulu in Ewa Beach, Hawaii.
Sonic disclosed that it will pay approximately US$121 million for CLH, which has annual revenues of about $110 million. According to Sonic, the purchase price represents a multiple of prospective EBITDA (earnings before interest, taxes, depreciation, and amortization) of 6.2. Both parties expect the acquisition to close by the end of third quarter, subject to anti-trust review by the federal government.
Clinical Laboratories of Hawaii, LLP has served the Hawaiian Islands since its founding in 1971 by pathologist Moon Park, M.D. Dr. After the sale to Sonic Healthcare, Park will remain as a consultant. His daughter, Ally Park, will continue in her current role as CEO of CLH. Dark Daily subscribers and regular readers know that Sonic Healthcare operates a “federated business model,” in which acquired laboratories continue to operate under their own name and as an independent business division of Sonic Healthcare.
CLH has facilities on four of the islands: Oahu, Hawaii, Maui, and Kaui. Over the years, it has developed management relationships and partnerships with a number of hospitals, clinics, and physician groups. Its primary competitor in the Hawaiian Islands is Diagnostic Laboratory Services, Inc. (DLS), which is based in Honolulu. Diagnostic Laboratory Services is owned by Queen’s Health Systems and Kuakini Health System.
For almost two decades, the market for laboratory services in the Hawaiian Islands has been dominated by DLS and CLH. Thus, the acquisition of CLH by Sonic Healthcare will introduce new competitive dynamics. From a geographical perspective, Sonic, in Sydney Australia, is 5,071 miles from Honolulu. In turn, Honolulu is 3,750 miles from Austin, Texas, where Sonic’s corporate headquarters in the United States is located.
This is the second laboratory acquisition Sonic Healthcare has announced. Just two weeks ago, on June 16, Sonic disclosed its acquisition of Labor 28, an independent laboratory company based in Berlin, Germany for an estimated purchase price of US$108 million. (See Dark Daily, June 18, 2008).
Finally, two other major laboratory organizations in the United States are believed to still be seeking a buyer. One is the Carillion Consolidated Laboratory, owned by Carilion Clinic of Roanoake, Virginia. The other is the laboratory outreach program of Stanford Hospital and Clinics . (See The Dark Report, March 3, 2008.) In both cases, it is believed that interested bidders include Sonic Healthcare, as well as Laboratory Corporation of America and Quest Diagnostics Incorporated. Thus, other laboratory acquisition announcements may be forthcoming over the summer.
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