Quest Diagnostics 2006 Annual Report Download - page 102

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3. BUSINESS ACQUISITIONS
2006 Acquisitions
Acquisition of Focus Diagnostics
On July 3, 2006, the Company completed its acquisition of Focus Technologies Holding Company (“Focus
Diagnostics”) in an all-cash transaction valued at $208 million, including approximately $3 million of assumed
debt. Focus Diagnostics is a leading provider of infectious and immunologic disease testing and develops and
markets diagnostic products. It offers its reference testing services and diagnostic products to large academic
medical centers, hospitals and commercial laboratories. The Company financed the aggregate purchase price of
$205 million, which includes $0.5 million of related transaction costs, and the repayment of substantially all of
Focus Diagnostics’ outstanding debt with $135 million of borrowings under its secured receivables credit facility
and with cash on hand.
The acquisition of Focus Diagnostics was accounted for under the purchase method of accounting. As such,
the cost to acquire Focus Diagnostics was allocated to the respective assets and liabilities acquired based on their
estimated fair values as of the closing date. A preliminary allocation of the cost to acquire Focus Diagnostics has
been made to certain of its assets and liabilities based on preliminary estimates. The Company is continuing to
assess the estimated fair values of certain assets and liabilities acquired. The consolidated financial statements
include the results of operations of Focus Diagnostics subsequent to the closing of the acquisition.
Of the aggregate purchase price of $205 million, $142 million was allocated to goodwill, $33 million was
allocated to customer relationships that are being amortized over 10-15 years and $9.1 million was allocated to
trade names that are not subject to amortization. Substantially all of the goodwill is not expected to be deductible
for tax purposes.
Supplemental pro forma combined financial information has not been presented as the acquisition is not
material to the Company’s consolidated financial statements.
Acquisition of Enterix
On August 31, 2006, the Company completed its acquisition of Enterix Inc. (“Enterix”), a privately held
Australia-based company that developed and manufactures the InSureTM Fecal Immunochemical Test, a Food and
Drug Administration (“FDA”)-cleared test for use in screening for colorectal cancer and other sources of lower
gastrointestinal bleeding, for approximately $44 million in cash. The acquisition is not material to the Company’s
consolidated financial statements.
2005 Acquisition
Acquisition of LabOne, Inc.
On November 1, 2005, the Company completed its acquisition of LabOne, Inc. (“LabOne”) in a transaction
valued at approximately $947 million, including approximately $138 million of assumed debt of LabOne. LabOne
provides health screening and risk assessment services to life insurance companies, as well as clinical diagnostic
testing services to healthcare providers and drugs-of-abuse testing to employers.
Under the terms of the merger agreement, the Company paid $43.90 per common share in cash or $768
million in total to acquire all of the outstanding common shares of LabOne. In addition, the Company paid $33
million in cash for outstanding stock options of LabOne. Pursuant to the terms of the merger agreement, upon the
change in control of LabOne, LabOne’s outstanding stock options became fully vested and exercisable and were
cancelled in exchange for the right to receive an amount, for each share subject to the stock option, equal to the
excess of $43.90 per share over the exercise price per share of each option. The aggregate purchase price of
$810 million includes transaction costs of approximately $9 million.
In conjunction with the acquisition of LabOne, the Company repaid approximately $127 million of debt,
representing substantially all of LabOne’s existing outstanding debt as of November 1, 2005.
The Company financed the all cash purchase price and related transaction costs associated with the LabOne
acquisition, and the repayment of substantially all of LabOne’s outstanding debt with the net proceeds from a
$900 million private placement of senior notes (see Note 10) and cash on hand.
F-15
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)