Alliance Talks Merger With U.S. Diagnostic

ORANGE —  Alliance Imaging Inc., seen as a company likely to acquire others in the business of diagnostic imaging, said Friday that it’s now considering being acquired.

In an unexpected move, the operator of mobile MRI (magnetic resonance imaging) units said it’s discussing a possible merger with U.S. Diagnostic Labs Inc., another operator of diagnostic services, through a stock swap tentatively valued at $65 million to $71 million.

Preliminary terms call for Alliance shareholders to receive stock valued at $6 to $6.50 a share. However, company officials indicated that the companies are weeks away from closing the deal.

Analysts were taken aback by the announcement, noting Alliance’s aggressive strategy of acquiring smaller operators in its industry across the country.

“The whole strategy and idea of Alliance has been to build the company,” said John Westergarrd, who runs a New York online investment research service. “All of a sudden for it to end up in a situation where it’s a minor partner surprised me.”

Alliance stock closed Friday at $5.44, down 56 cents in Nasdaq trading.

Alliance’s mobile units consist of trucks bearing magnetic resonance imaging equipment to small- and medium-sized hospitals that can’t afford their own centers. The technology aids in diagnosis of strokes and other soft-tissue problems.

Richard N. Zehner, Alliance’s chairman and chief executive, acknowledged that “being consolidated or merging with somebody wasn’t necessarily in our plans.”

But he estimated that U.S. Diagnostic, based in West Palm Beach, Fla., has an acquisition kitty of more than $150 million in cash and other financial resources, compared to Alliance’s $10 million or so.

Assuming the acquisition proceeds, Zehner said Alliance will end up with more financial firepower to pursue its own acquisitions.

Though discussions are still preliminary, Zehner said Alliance would probably end up as a subsidiary of U.S. Diagnostic that would be run by Alliance’s current executive team.

He said he doesn’t expect the company’s sale would bring cutbacks in its 320-employee workforce nationwide, which includes 70 workers across Southern California. “In fact, we are hoping to add employees,” he said.

Analysts expect Alliance will continue to work its corner of the market, while its future parent would continue to acquire more fixed sites offering radiological services.

U.S. Diagnostic presently operates 70 radiology facilities in a dozen states.