Shares of the New Brighton-based medical testing firm jumped $6.98 on news of the sale to Laboratory Corp. of America Holdings.
Shares of Medtox Scientific Inc., a provider of employment drug-testing services and forensic and clinical laboratory services, surged more than 35 percent Monday on news that it agreed to be acquired by a much-larger competitor for $241 million.
New Brighton-based Medtox said it agreed to merge with Laboratory Corp. of America Holdings, a $5.6 billion player in the growing diagnostic technologies industry.
Shares of Medtox closed at $26.88, up $6.98, or 35.4 percent.
Under terms of the agreement, still subject to approval by Medtox shareholders, LabCorp will pay $27 a share in cash, which represents a premium of 37 percent over Medtox's Friday close of $19.70.
Piper Jaffray analyst Kevin Ellich said the deal represents a good fit for North-Carolina-based LabCorp because Medtox "runs a good and efficient business and we expect meaningful cost synergies."
Medtox Scientific, which ranked 66th on the latest Star Tribune 100 list, had annual revenue for 2011 of $108 million, up 11.4 percent from the previous year. The company has about 765 employees.
It's unclear whether LabCorp will retain the Medtox operations and employees in New Brighton -- both companies did not respond to phone calls for comment on Monday.
But Ellich, who follows LabCorp, speculates that the company will retain local operations because it provides good opportunities for LabCorp to expand its presence in the Upper Midwest.
Both companies compete in the $55 billion clinical laboratory testing industry that is led by giant Quest Diagnostics of Madison, N.J.
LabCorp performs more than 1 million tests on about 370,000 specimens a day for doctors, hospitals, managed-care organizations, biotechnology and drug companies. It is the exclusive national laboratory for Minnetonka-based UnitedHealthcare.
Routine tests include blood chemistry analyses, urinalyses, blood cell counts, thyroid tests, Pap tests, HIV tests, microbiology cultures and procedures, and alcohol and other substance-abuse tests. In addition, the company provides specialty testing services for allergies, clinical trials, diagnostic genetics, identity, forensics, infectious disease, oncology and occupational testing.
Medtox has carved out a niche in drug testing for employment screening and occupational health testing, and it has a division that does central laboratory and bio-analytical testing for drug clinical trials.
Dick Braun, chairman and CEO of Medtox, said, "This transaction highlights the fundamental value of the Medtox brand, the talent and expertise of our team and the quality of our products and testing services."
He added, "As part of LabCorp with its substantial resources and infrastructure, we expect to accelerate Medtox's profitable growth and provide a stable and sustainable environment for our employees and clients."
Meanwhile, the Dallas-based securities law firm Powers Taylor is investigating the sale on behalf of shareholders. Led by former Securities and Exchange Commission attorney Willie Briscoe, the probe centers on whether Medtox shareholders are receiving adequate compensation for their shares in the buyout, whether the transaction undervalues Medtox's stock, and whether the Medtox board attempted to obtain the highest share price for shareholders.
"It is notable that Medtox has shown substantial growth over the past year, so we are concerned that the buyout price may not be fair to shareholders," Briscoe said.