Lull reported in Raytel's effortto take over Medical Diagnostics

Firms agree to negotiate over acquisition

The guns have stopped blazing -- at least temporarily -- in Raytel'shostile bid to take over Medical Diagnostics. But despite a temporaryarmistice, the particulars of the four-month-long takeover battlehave not changed, according to Eileen Kirrane, vice presidentof corporate and investor relations at MDI. Raytel's $5 per sharetender offer still stands. MDI's board of directors rejected thatoffer as inadequate on Dec. 15 (SCAN 2/1/95).

The only recent change has been MDI's apparent response tothe peace offering broached by Raytel on Feb. 27. On that date,Raytel, an imaging services company in San Mateo, CA, offeredto negotiate an acquisition with the MDI board. MDI's board agreedto exchange confidential information with Raytel and other companies,according to Kirrane.

"That exchange is for the purpose of seeing whether ornot Raytel and/or other parties would be interested in potentiallyacquiring the company for a higher price than was originally offered,"Kirrane said.

The board is examining several options, according to Kirrane.They include a sale of assets or other forms of corporate combinationwith any one of several parties, including Raytel.

"We don't want to preclude the possibility that our boardmay elect for us to pursue an independent (course)" Kirranesaid. "That option remains open."

Raytel officials were not available for comment at press time.

Like many hostile takeovers, Raytel's attempt to swallow MDIhas been acrimonious. In February, the dispute was reduced toname-calling over accusations about potential severance paymentsto be awarded to MDI chief executive John Lynch if the companychanged ownership.

Stephens, Inc., investment bankers hired by Raytel, statedin letters to MDI shareholders that Lynch would receive $3.5 million.MDI challenged that claim, noting that Lynch's contract entitledhim to $1.3 million.

Industry observers rate MDI as one of the healthiest companiesin diagnostic imaging services. Most freestanding imaging centersand mobile services owned by the Burlington, MA, firm are insulatedfrom competition by their placement in regulated certificate-of-needstates. In fiscal 1994, MDI earned $1.6 million on revenues of$20 million.