One of the country’s largest pension plans has put Canada’s biggest medical testing company, LifeLabs Medical Laboratory Services, up for sale after building the business over 17 years, drawing interest from suitors based in the United States and Canada.

Last year, Ontario Municipal Employees Retirement System (OMERS) hired investment banks to find a new owner for Toronto-based LifeLabs, according to four sources familiar with the sales process. Two of the sources said OMERS picked New York-based Evercore Group LLC to run the process and also brought in a Canadian bank.

OMERS has invested more than $2.5-billion in LifeLabs and two of the sources said the asset manager is asking for a premium valuation on the business, well above the capital OMERS has put into acquisitions.

LifeLabs has drawn multiple bidders, with two health care companies emerging as the leading contenders, three of the sources said.

One is Vaughan, Ont.-based Andlauer Healthcare Group, which is run by founder and chief executive officer Michael Andlauer, who led a group of investors that recently purchased the National Hockey League’s Ottawa Senators. Andlauer Healthcare is a medical logistics business, delivering drugs to pharmacies and hospitals, with a $1.7-billion market capitalization.

The second is Secaucus, N.J.-based Quest Diagnostics Inc., a leading U.S. clinical laboratory company with a US$15.2-billion market capitalization. In recent years, Quest used acquisitions to expand in the U.S. and internationally.

The Globe and Mail is not naming the sources because their employers do not permit them to discuss potential transactions.

OMERS Infrastructure said “categorically” that it is not in late-stage discussions with any party.

“As a long-term investor, we are always evaluating opportunities for the businesses within our portfolio. There have been some preliminary discussions with multiple parties who have expressed interest, which may or may not lead to a transaction,” OMERS Infrastructure said in an e-mailed statement.

Spokespeople for Quest Diagnostics and Andlauer Healthcare did not respond to requests for comment on Tuesday. LifeLabs referred inquiries on a possible transaction to OMERS, and Evercore declined to comment.

The current sale process is not the first time OMERS has put LifeLabs on the market. The pension fund manager had quietly tried to sell LifeLabs in previous processes and failed to find a buyer, according to two of the sources. There is no guarantee a sale will be completed or that OMERS will find a buyer willing to pay what it deems an acceptable price for LifeLabs.

The current auction could determine whether LifeLabs stays in Canadian hands, if Andlauer prevails, or whether U.S. health care companies will further take control of an already concentrated market for laboratory testing in Canada.

LifeLabs has 5,700 employees performing 112 million tests each year at labs in three provinces, Ontario, British Columbia and Saskatchewan. The company runs 382 collection centres and 16 laboratories.

LifeLabs’s major domestic rival, Dynacare, is owned by one of the largest U.S. medical testing companies, Laboratory Corp. of America Holdings, commonly known as Labcorp. Dynacare has 2,400 employees and 200 collection centres and labs in four provinces – Alberta, Manitoba, Ontario and Quebec. Burlington, N.C.-based Labcorp acquired Dynacare for US$480-million in 2002.

OMERS began building its diagnostics business in 2007 when its infrastructure arm acquired MDS Diagnostic Services for $1.33-billion from another Toronto-based company, MDS Inc., and rebranded the company as LifeLabs. Five years later, LifeLabs expanded its British Columbia platform by purchasing physician-owned B.C. Biomedical Laboratories Inc.

In 2013, LifeLabs became the country’s largest medical testing business – based on the number of tests it performs – when it purchased CML Healthcare Inc. for $1.2-billion. Quest also bid, unsuccessfully, for CML at the time, according to one of the sources, who worked on the transaction.

If OMERS does sell LifeLabs, it would be the asset manager’s second sale of a medical testing business in the past year. Last August, OMERS and Labcorp sold a jointly owned company in Alberta, Dynalife Medical Labs, to provincial-government-owned Alberta Precision Laboratories.

Quest has expanded in the U.S., Europe and South America over the past two decades through a series of takeovers. Its 50,000 employees already provide the medical services that form the core of LifeLabs’s business, with a portfolio of more than 3,500 tests available.

Andlauer Healthcare, founded in 1991, focuses on transportation and logistics, moving health care products such as COVID-19 vaccines from pharmaceutical companies to patients, hospitals and retailers. Two-thirds of its $479-million of revenue in the first nine months of 2023 came from its trucking business. Should Andlauer prevail, it would signal it is branching out into a new part of the health care industry.

OMERS’ pitch to potential buyers portrays LifeLabs as an infrastructure sector investment, with dependable revenues from providing medical services to an aging population, according to three of the sources. In 2022, LifeLabs rolled out new tests by striking a partnership with Natera Inc., which focuses on DNA testing, to provide individualized cancer testing.

LifeLabs’s primary clients are provincial health ministries and private insurers, which are pushing testing centres and other medical suppliers to cut costs. Any potential buyer will have to factor in governments’ and the insurance industry’s willingness to continue paying for medical tests into the price they offer for LifeLabs, the sources said.

OMERS oversees $127.4-billion in assets for firefighters, police officers and other public employees. LifeLabs is part of the pension fund’s $34-billion infrastructure portfolio. OMERS routinely recycles capital by selling long-term holdings, such as a medical testing business built through acquisitions, and putting the proceeds back to work in new investments.