Monogram Deal Inches Forward

On July 17, 2009, South San Francisco-based life science company Monogram Biosciences, Inc. (MGRM) and North Carolina-based clinical laboratory company Laboratory Corp. of America Holdings (LH - Snapshot Report) announced that the proposed acquisition of the former is well on its way since the waiting period under Hart-Scott-Rodino has expired with neither the Federal Trade Commission nor the U.S. Department of Justice acting.
 
The acquisition of Monogram by LabCorp was announced in June this year for about $106.7 million in cash. In addition, LabCorp had agreed to assume about $48 million in debt. With an eye on the acquisition, the clinical laboratory company initiated a tender offer on July 1, 2009 for all of the outstanding shares of common stock of Monogram for $4.55 per share in cash. The offer is scheduled to expire on July 29 unless otherwise extended.
 
The transaction, which is expected to close in the third quarter of 2009, has already been approved by Monogram. The merger should be beneficial to both companies. The acquisition will strengthen Monogram’s balance sheet substantially. Further, the acquisition will help broaden its customer base as currently a significant portion of its revenue comes from a small number of customers, mainly Pfizer (PFE - Analyst Report) and Quest Diagnostic (DGX - Snapshot Report).
 
LabCorp intends to utilize its infrastructure to make use of Monogram's already strong sales performance to further strengthen its position in the fields of infectious disease and cancer testing, companion diagnostics and personalized medicine. The deal is expected to increase its profits in 2010.
 
Currently, we have a Hold rating on Monogram’s shares.