A Diagnostics & Imaging Week

American Capital Strategies (Bethesda, Maryland) reported that it has invested $79.5 million in the buyout of Redwood Toxicology Laboratory, Redwood Biotech and PerMaxim (collectively Redwood; Santa Rosa, California), a provider of drugs-of-abuse lab testing services and on-site test kits to the correctional, rehabilitation and point-of-care markets.

The investment is in the form of a revolving credit facility, senior term debt, senior subordinated debt and preferred and common equity. Post-close, American Capital will own 67% of Redwood, with members of Redwood's management team owning the balance.

Redwood consists of three entities: Redwood Toxicology, a provider of drugs-of-abuse laboratory testing services to correctional and rehabilitation centers; Redwood Biotech, a distributor of on-site disposable drug testing kits; and PerMaxim, a distributor of rapid test kits for detection of drugs-of-abuse, pregnancy and infectious diseases.

Redwood "is a leading company in a niche market segment with exciting growth opportunities," said Darin Winn, regional managing director of American Capital, saying the deal represents his organization's ability "to provide the entire financing package in a transaction, including senior debt, mezzanine debt and equity, and to quickly bring a transaction to close."

American Capital, a publicly traded buyout and mezzanine fund, reports about $7 million in capital resources.

In other dealmaking activity:

• Diagnostic Corporation of America (DCA; Clearwater, Florida) said that it has agreed to acquire all outstanding shares of WiFiMed (Maynard, Massachusetts) via a reverse merger in which WiFiMed will be merged with and into a newly formed subsidiary of DCA.

DCA said it intends to reverse split its outstanding common stock at about 1:8. Giving effect to the reverse split and the reverse merger, current shareholders of WiFiMed will be issued 90% of DCA common stock.

WiFiMed is a development stage company, which provides wireless patient information through its primary product, the Tablet MD system, operating on a tablet PC, and manages patient medical information, consultation notes, prescriptions, records and charts.

• Lifeline Biotechnologies (Reno, Nevada) said that it is "actively pursuing" acquisition and merger candidates to continue its growth.

"Lifeline Biotechnologies has incorporated a strategy to rapidly develop the company through the mergers and acquisition of other companies in the medical, nutraceutical and energy industries," said Jim Holmes, president and CEO of Lifeline. "This will enable the company to accumulate assets and increase revenues and profitability."

Lifeline said it has completed initial patient testing of its OvaScope product, a micro endoscope to be used in the early detection of ovarian cancer.

Lifeline said that its technologies focus on prevention, early detection, diagnosis and quick recovery of a number of disease conditions. Its MastaScope is used in the early detection of cancer and other abnormalities of the breast. Its First Warning System for assisting in the early detection of breast cancer and the OvaScope for assisting in the early detection of ovarian cancer are continuing in development.

• Pacer Health (Miami), an owner-operator of acute care hospitals, medical treatment centers and psychiatric care facilities in the Southeastern U.S., announced that it has assumed the management and operation of Knox County Hospital (Barbourville, Kentucky), a 42-bed, state-of-the-art acute care facility.

Pacer signed a binding letter of intent with Knox County in early February to lease the facility with an option to purchase it during the contract period.

As part of the transaction, Pacer management said it paid $250,000 to Knox County to solidify the interim agreement and fund a portion of the hospital's debt. The agreement carries a penalty of $750,000 if either party terminates the contract during the bond refinancing period.

Knox County Hospital offers a suite of healthcare services, including nuclear medicine, surgical services, physical therapy, spiral computed tomography, mammography, 24-hour emergency services and a 16-bed nursing unit.

Pacer is an owner/operator of acute care hospitals, medical treatment centers, and psychiatric care facilities serving non-urban areas throughout the Southeast.