Swiss suitor Unilabs seen as frontrunner in Synlab sale - sources

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FRANKFURT, June 19 (Reuters) - Swiss-based medical diagnostics group Unilabs is seen as the frontrunner to buy German laboratory operator Synlab in a deal that could be worth 1.7 billion euros ($1.9 billion), according to sources familiar with the matter said.

Buyout group BC Partners put Synlab up for sale earlier this year in an auction organised by investment bank Rothschild, initially targeting only private equity firms as prospective buyers.

Unilabs, owned by private-equity investors Apax Partners and Nordic Capital, has entered the auction and has met Synlab's management, the sources said.

It is the only suitor that can take advantage of considerable cost synergies from combining its operations with Synlab's, particularly in Unilabs' largest market Switzerland, so is likely to be prepared to offer a higher price, they added.

Private equity groups such as Blackstone (NYSE: BX - news) and Advent have already dropped out of the race, while other prospective buyers are considering dropping out as well, the sources said.

Cinven and EQT remain in the auction, which the seller hopes to conclude before the summer break at a valuation of 1.7 to 1.9 billion euros, including debt, or 11.5 to 13 times Synlab's annual core earnings, the sources added.

The fact that Unilabs has entered the race has roiled some buyout firms which had been attracted to the sales process based on the assumption that no industry player - which can typically afford a premium over what financial investors are willing to pay - would place bids, the sources said.

BC Partners, Apax Partners, Nordic Capital, Blackstone, Advent, Cinven, EQT and Rothschild all declined to comment.

Separately, some of the prospective buyers are concerned that Unilabs may be working on an acquisition of General Atlantic-owned labs group Amedes, the sources said.

General Atlantic had tried to sell Amedes in 2014 but failed to attract bidders prepared to meet its asking price of 700 million euros, or roughly nine times its annual core earnings.

"Even (Taiwan OTC: 6436.TWO - news) if Unilabs did not succeed in buying Synlab, a potential acquisition of Amedes would limit the scope of any other buyer's ambitions to consolidate the market," one of the sources said.

($1 = 0.8851 euros) (Reporting by Arno Schuetze, Ludwig Burger and Alexander Hübner; Editing by Thomas Atkins and Pravin Char)