UNILAB DEAL WITH QUEST MAY CHANGE $60 MILLION COULD BE TRIMMED.

Byline: Evan Pondel Staff Writer

TARZANA - Unilab Corp. and Quest Diagnostics Inc. said on Monday they may amend their merger agreement, a move that could reduce the transaction's overall value by $60 million.

Quest Diagnostics, the leading provider of blood testing services in the nation, announced its $900 million acquisition last spring. But the deal has drawn antitrust concerns because the combination of the two companies could be perceived as a monopoly.

``Obviously, these discussions show that both companies are interested in keeping the band together and getting the merger done,'' said Robert Parente, analyst with Leerink Swann & Co.in Boston.

Both companies are in discussions with a third party to sell ``certain assets in Northern California.'' Though neither Unilab nor Quest would confirm who owned those assets, their potential sale could address Federal Trade Commission concerns.

``Right now, Unilab has the largest presence in California,'' Parente said. ``They (Unilab) probably have to spin off some assets to appease the authorities.''

Aside from selling off assets, the new changes would also include reducing the transaction's value based on the closing price of Quest Diagnostics common stock on Nov. 29. That means Unilab shareholders will receive the equivalent of $19.10 per share in cash and stock. The initial deal called for $20.67 per share.

Under the revised terms, Quest Diagnostics would not issue more than the 8.5 million shares or pay more than the $297 million in cash.

``Some changes still have to be approved by the boards. We will be discussing these things later this week,'' said Gary Samuels, a spokesman for Teterboro, N.J.-based Quest. ``Both companies are strongly committed to finishing this thing.''

The companies now expect the transaction to be completed within 30 to 60 days.

If the deal is approved, Quest will acquire all of Tarzana-based Unilab's operations, including three full-service laboratories, 39 rapid-response laboratories and 386 patient-service centers. Unilab's employee base of around 4,000 will also be absorbed by Quest.

For Unilab, which reported 2001 revenues of $390 million, the deal comes almost a year after the company went public. Robert Whalen, chairman, president and chief executive officer of Unilab, said in a previous interview that the acquisition would greatly bolster the company's research and development opportunities.

Unilab lost 48 cents to close at $19.19 on the Nasdaq market, while Quest shares rose $2.07 to close at $57.86 Monday on the New York Stock Exchange.