LifeLabs Medical Laboratory Services agreed to buy CML Healthcare Inc., an Ontario-based diagnostic services provider, for C$10.75 a share, a premium of 49 percent to the closing price on June 24.

The transaction value, including debt of C$255 million ($242 million), is about C$1.22 billion ($1.16 billion), CML said today in a statement. The purchase, under an “arrangement agreement,” has been approved by the boards of CML, LifeLabs and the Ontario Municipal Employees Retirement System, an indirect owner of LifeLabs, CML said.

The acquisition combines two of Canada’s largest medical diagnostic laboratory operators. Closely held LifeLabs serves approximately 10 million patients across Ontario and British Columbia. CML, currently trading on the Toronto Stock Exchange, operates 112 client care centers and 82 imaging centers in the same area.

“This is a very fair price for CML,” said Trevor Johnson, an analyst at National Bank Financial in Toronto. “When I do the math for CML, the metrics are very compelling if you’re a shareholder in terms of valuation.”

CML shares gained as much as 49 percent to C$10.70, the largest intraday increase since November 1996, and traded at C$10.60 at 10:30 a.m. in Toronto.

Patrice E. Merrin, CML’s chairman, called the acquisition “a natural fit for two strong companies,” in a statement. LifeLabs president and chief executive officer Sue Paish said that “coming together, we can be even stronger partners with government and health-care partners in the planning and delivery of high quality and accessible diagnostic services for Canadians.”

The purchase is expected to be completed in September, pending regulatory approval, the company said. Goldman Sachs Group Inc. is acting as financial adviser, and legal counsel will be provided by Goodmans LLP for CML and Bennett Jones LLP for the Special Committee of the board of directors.

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