Touting an opportunity for growth as a driving factor, Quest Diagnostics (Lyndhurst, New Jersey) yesterday said it has agreed to buy AmeriPath (Palm Beach Gardens, Florida) for about $2 billion, including roughly $770 million in debt at closing.

AmeriPath, a company controlled by Welsh, Carson, Anderson and Stowe, provides dermatopathology, anatomic pathology and esoteric testing, and has annual revenues of more than $800 million.

Asked about the potential synergies associated with the deal, Quest's CFO Bob Hagemann told investors during a morning conference call that cost synergies were not the key drivers behind the company's acquisition of AmeriPath.

Hagemann said there would be very little integration, that AmeriPath would continue to operate in much the same way as it currently does, and that Quest does not plan to close any of AmeriPath's major facilities.

"We're doing this because it's a growth opportunity . . . . With that said, though, there are some synergy opportunities: overhead costs, purchase logistics, and potentially some bad debt. We'll realize some of that in the first year with the rest of that realized in the second year," Hagemann said.

Hagemann also told conference call listeners that Quest believes $2 billion is a reasonable price for AmeriPath and that the acquisition will generate a good return for the company overtime.

"That's really the value for our shareholders, accelerated earnings growth and accelerated revenue growth," Hagemann said.

Surya Mohapatra, PhD, CEO and chairman of Quest, also emphasized the value of the $2 billion cash deal.

"This acquisition will establish our leading position in cancer diagnostics with a focus on dermatopathology, anatomic pathology and molecular diagnostics," Mohapatra said. "AmeriPath is respected for its leadership in dermatopathology and anatomic pathology, two of the fastest growing segments in diagnostic testing. Additionally, its Specialty Laboratories will further strengthen our hospital and esoteric testing business. The acquisition will accelerate Quest Diagnostics' revenue and earnings growth and provide compelling benefits for patients, physicians, hospitals and payers through enhanced customer service and expanded test offerings."

AmeriPath operates three divisions. Dermpath Diagnostics has a team of more than 80 board-certified dermatopathologists who interpret 2.4 million biopsies a year. Its anatomic pathology division, which operates under the AmeriPath brand, has expertise in gastroenterology, urology, oncology and women's health. Specialty Laboratories, its esoteric testing business, is a full-service clinical laboratory serving hospitals, reference laboratories and physicians nationwide. AmeriPath has about 400 pathologists and clinical scientists and nearly 4,000 employees.

"AmeriPath and Quest Diagnostics share a deep commitment to providing the highest quality diagnostic services to physicians and their patients," said Donald Steen, CEO and chairman of AmeriPath. "The joining together of our companies will facilitate and accelerate our mission of becoming the leader in the innovative delivery of quality pathology disease management services."

The companies expect to complete the transaction this quarter.

"I am extremely excited that this is going to play an important role in cancer and not only for diagnostics but also for treatment and monitoring," Mohapatra said during the conference call.

Quest said it will pay for the transaction, refinance AmeriPath's existing debt, and the debt from the acquisition of HemoCue (Angelhom, Sweden) completed earlier this year with the proceeds of a new $1 billion one-year bridge loan and a new five-year $1.5 billion term loan, both committed to be underwritten by Morgan Stanley. The bridge loan is expected to be refinanced shortly after the closing.

Welsh, Carson, Anderson and Stowe bills itself one of the largest and most successful private equity investment firms in the U.S. Since its founding in 1979, Welsh Carson has organized 14 investment partnerships with capital of more than $16 billion.

In other dealmaking:

• Wright Medical Group (Arlington, Tennessee) reported acquiring certain assets of R&R Medical (Pennsylvania), a company providing external fixation devices for the foot and ankle and trauma markets. Wright will make an initial cash payment of $8 million and make milestone payments based upon the financial performance of the acquired assets.

The assets acquired include the R&R external fixation product line, consisting of an array of foot- and ankle-focused external fixation devices, including the Circular Freedom Frame, the Hollawell Tomahawk Mini-Fixator, the Patriot Mini-Fixator and the Stealth Fusion System. These products address those external fixation procedures performed by foot and ankle surgeons and surgical podiatrists, the company said.

Wright said it will begin offering external fixation solutions through its U.S. sales force immediately, with expansion into international markets later this year.

Wright Medical manufactures of reconstructive joint devices and biologics.

• Arcadia Resources (Southfield, Michigan) said it will sell part of the operations of its Durable Medical Equipment (DME) business for about $16.5 million, consisting of $$9.5 million in cash and $7 million in short-term and long-term notes.

Arcadia described the buyer as "a regional provider of therapeutic equipment and services" and said the deal will close next month.

The DME business provides oxygen and other respiratory therapy services and equipment to individuals and nursing care facilities, as well as orthotic and prosthetic devices, wheelchairs, hospital beds and other medical equipment.

Arcadia said that the decision to sell part of the DME operations, along with the corporate restructuring initiatives reported previously, will sharpen focus on higher-margin businesses, free up financial resources and provide cost-efficiencies.

The sale will include all of the DME business except the company's Florida operation, which is the company's largest DME division and will continue to be owned by Arcadia. The company noted that one of its Florida units has just been approved as a supplier by Medicare, enabling it to submit claims for reimbursement of roughly $2 million.

• Competitive Technologies (CTT; Fairfield, Connecticut) reported that Focus Diagnostics (Cypress, California) will be producing enterovirus assay kits under the recently expanded license granted to them for the use of the patented technology for the Rapid Assay of Human Enteroviruses. The technology is the result of research by Dr. Harley Rotbart conducted at the University of Colorado Health Sciences Center (Denver), a CTT client. The agreement provides commercialization and recurring royalty fees for both UCHS and CTT.

Focus, a wholly owned subsidiary of Quest Diagnostics, develops products for diagnosing infectious diseases.