Merger negotiations between U.S. Diagnostic Labs and Alliance Imaging ended after a variety of factors, including financing, scuttled the consolidation.
The companies earlier had announced that U.S. Diagnostic was looking at purchasing Orange, Calif.-based Alliance (Aug. 26, p. 34). A deal would have made U.S. Diagnostic the dominant provider of radiology services in the country.
But the talks fell through when U.S. Diagnostic, headquartered in West Palm Beach, Fla., decided Alliance "didn't fit the picture as well" as first thought, said Joe Scime, an investor relations representative for U.S. Diagnostic.
He contrasted the companies' areas of expertise, noting that U.S. Diagnostic concentrates on fixed-site imaging services, while Alliance focuses on mobile imaging services.
U.S. Diagnostic owns 63 diagnostic imaging centers and manages 17 other radiology facilities in 12 states. It projects pro forma revenues of $165 million for 1996. Alliance operates 87 magnetic resonance imaging and eight computed tomography systems in 36 states and expects revenues of $60 million this year.
Scime further attributed the reversal to Alliance's difficulties in renegotiating its debt with lenders. Jeffrey Goffman, chairman and chief executive officer of U.S. Diagnostic, had warned that he wanted Alliance to restructure a large portion of its $65.9 million debt before he would approve an agreement.
Another hurdle, according to Alliance, was the exchange ratio initially discussed by the two parties. Goffman had said U.S. Diagnostic would swap $65 million to $70 million in stock for Alliance. When U.S. Diagnostic's stock price varied on leaked rumors of the acquisition, Goffman grew frustrated. In the end, Alliance said in a statement, the price "could not be justified by U.S. Diagnostic."
However, both companies have acknowledged their interest in pursuing another form of partnership, such as a joint venture or a networking arrangement. Details of any such agreements haven't been disclosed.
In other developments, U.S. Diagnostic has completed its acquisition of Quantum Imaging in Houston. Quantum operates 10 diagnostic imaging facilities in the Houston area and expects to post $12.5 million in revenues this year. Under the purchase agreement, U.S. Diagnostic will own 70% of the new facilities and two other investors each will own a 15% stake.