US-based diagnostic services provider Quest Diagnostics has agreed to acquire LifeLabs, a Canada-based provider of community laboratory tests, for up to C$1.35bn ($985m).

Quest signed the agreement with the Canadian pension plan company Ontario Municipal Employees Retirement System (OMERS).

The acquisition builds on an existing relationship between the two companies. LifeLabs has participated in the Quest-led Global Diagnostic Network, over the past five years.

Under the terms of the agreement, the US company will acquire 100% of LifeLabs. It intends to fund the acquisition through debt and available cash on hand.

The acquisition is expected to be completed by the end of this year, subject to certain customary closing conditions and approvals, including Canadian regulatory approvals.

Quest expects the transaction to generate around C$970m ($710m) in annual revenues and to be slightly dilutive to GAAP earnings per share (EPS).

Quest Diagnostics chairman, CEO and president Jim Davis said: “This transaction is predicated on our strong belief that we can help LifeLabs accelerate growth and improve healthcare.

“We are committed to working with the LifeLabs team to ensure service continuity and enhance access and innovation to meet the needs of Canada’s growing and ageing population.”

OMERS executive vice president and infrastructure global head Michael Hill said: “OMERS is proud to have supported LifeLabs’ growth over the last 17 years. Our purchase in 2007 and subsequent investments have helped LifeLabs grow into a great Canadian success story.

“Quest is uniquely equipped to expand the service offering at LifeLabs, bringing new innovations to this market while extending access for patients in Canada.”

Upon closing, LifeLabs will retain its brand, Canadian headquarters, and management.

Quest will provide LifeLabs with new expertise and resources to strengthen its services offering to more than 6,500 employees, including improved online appointment scheduling.

The US company also intends to advance LifeLabs’ data security enhancements while ensuring Canadian patients’ health data remains in Canada.

Quest has recently introduced several new tests that require special skills and technology, including in Alzheimer’s disease, women’s health, oncology and cardiometabolic health.

McCarthy Tétrault served as legal advisor to Quest. Blake, Cassels & Graydon served as legal advisors and Evercore and CIBC Capital Markets as financial advisors to OMERS.

LifeLabs president and CEO Charles Brown said: “Quest is the right partner to build on the strengths of LifeLabs and align with our strategic path, which focuses on enhancing the accessibility and quality of services that we provide to millions of Canadians.

“We know and respect Quest, as we share similar cultures and values and a productive test-reference relationship.

“Together, we’ll grow LifeLabs and provide more Canadians with access to the advanced diagnostics they rely on, closer to home. We sincerely thank OMERS for its investment, leadership, and valued collaboration over 17 years.”