LabCorp is playing white knight in the ongoing saga of the MedLab bankruptcy, riding in on a stalking horse to purchase its Terre Haute, Ind., operations. A stalking horse is a fancy name for an entity placing a price floor for bidding in an asset auction. It has guaranteed that it will pay a set amount for the asset unless it gets outbid by another party. In this case, Wilmington, N.C.-based LabCorp paid $10.5 million at auction on Feb. 10 to acquire Terre Haute Medical Laboratory and Pathology Associates of Terre Haute. Both assets belong to Laboratory Partners, which primarily operates under the name of MedLab. There were no other bidders, according to Laboratory Partners Chief Executive Officer Bill Brandt. Under the stalking horse guidelines, LabCorp could have been outbid and would have received a $300,000 fee for its troubles. Brandt said that LabCorp was a logical buyer for the business, which performs about 1.2 million tests and 500,000 accessions annually. LabCorp already purchased MedLab’s laboratory outreach business last year for $10.7 million, the sale part of the company’s plan to restructure and streamline. But a continued deterioration of its business prompted MedLab to file for bankruptcy last October and […]
LabCorp is playing white knight in the ongoing saga of the MedLab bankruptcy, riding in on a stalking horse to purchase its Terre Haute, Ind., operations.
A stalking horse is a fancy name for an entity placing a price floor for bidding in an asset auction. It has guaranteed that it will pay a set amount for the asset unless it gets outbid by another party.
In this case, Wilmington, N.C.-based LabCorp paid $10.5 million at auction on Feb. 10 to acquire Terre Haute Medical Laboratory and Pathology Associates of Terre Haute. Both assets belong to Laboratory Partners, which primarily operates under the name of MedLab. There were no other bidders, according to Laboratory Partners Chief Executive Officer Bill Brandt. Under the stalking horse guidelines, LabCorp could have been outbid and would have received a $300,000 fee for its troubles.
Brandt said that LabCorp was a logical buyer for the business, which performs about 1.2 million tests and 500,000 accessions annually. LabCorp already purchased MedLab’s laboratory outreach business last year for $10.7 million, the sale part of the company’s plan to restructure and streamline. But a continued deterioration of its business prompted MedLab to file for bankruptcy last October and engage in a plan to sell off its assets. The company has a significant stake in lab testing in the skilled nursing facility sector, a highly competitive sector that has been hit hard by cuts in reimbursement.
Pending approval by a bankruptcy judge later this week, Brandt said he expects the deal to close by early March. It does not include a contract to operate a nuclear testing laboratory for Union Hospital in Terre Haute. Brandt said those operations will likely be returned to Union in the form of a reversion sale.
MedLab, which operates in eight states and the District of Columbia, was also close to completing a deal to sell its long-term care laboratory business to Florida-based American Health Associates (AHA). Brandt said the first phase of that deal is also expected to close in March, with separate future closings this spring as AHA obtains licensure to operate in all the states where MedLab does business.
Takeaway: MedLab is edging ever closer to liquidating all of its assets.
