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Sue Paish, president and CEO of LifeLabs Medical Laboratory Services, will serve as co-CEO of the new entity.

DARRYL DYCK/The Globe and Mail

Canada will soon be home to the fourth-largest medical testing lab company in the world, after shareholders of CML Healthcare Inc. approved the $1.2-billion takeover of their company by rival LifeLabs Medical Laboratory Services .

At a meeting held in downtown Toronto Tuesday, shareholders voted overwhelmingly in favour of the proposal, which will see LifeLabs pay $10.75 for each CML share. LifeLabs will also assume CML's $255-million of debt.

The hundreds of testing centres run by the two companies collect specimens from patients and perform millions of blood tests as well as other medical analyses. The merger has sparked opposition from a group representing competing labs.

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CML chief executive officer Thomas Wellner said the new company will have a market share of about 67 per cent of non-hospital lab tests in Ontario, and about 85 per cent in British Columbia. Combined, the two companies conduct as many as 600,000 individual lab tests in a 24-hour period.

The combined powerhouse, which will rank fourth among global medical testing labs, will eventually consider expanding in other provinces and even outside the country, he said.

Mr. Wellner said he will stay on as co-CEO of the combined entity, along with LifeLabs CEO Sue Paish, at least for the time being.

LifeLabs is a private firm owned by the Ontario Municipal Employees Retirement System through its Borealis Infrastructure arm.

While more than 99 per cent of CML's shareholders who voted cast their ballots in favour of the deal, many will have lost money on their investment. As recently as April, 2012, the stock was trading at above the sale price. One shareholder at the meeting Tuesday noted that for her and many others who paid more than $10.75 for their stock, "this is not a good news story." CML is widely held, and its largest shareholder is Boston-based mutual fund giant Fidelity Investments, which holds 15 per cent of the stock.

Ms. Paish, in a recent interview with The Globe and Mail, said the merger will give LifeLabs the scale to operate efficiently in its two primary markets of Ontario and British Columbia. It will also allow the company to invest in new technology such as genetic testing, she said.

Because medical laboratories get most of their revenue from provincial health ministries, which pay for the majority of lab tests, they are under constant pressure to cut costs, build scale and do the testing as efficiently as possible.

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This is the second major acquisition for LifeLabs in less than a year. This past spring it purchased B.C. Biomedical Laboratories Inc., a competitor in the British Columbia market.

LifeLabs hopes to expand its online appointment booking system to the CML labs. And it wants to shift into Ontario a system now available in B.C., where patients are sent results by e-mail soon after tests are performed.

Lifelabs has already received approval for the CML takeover from the Competition Bureau. The deal is set to close by the beginning of October, after it gets final court approval.

Concern over the size of the combined company has prompted a coalition of smaller labs to create pressure on the Ontario government to block the deal, with claims of a near-monopoly situation in the province.

The merger will create a "giant mega-lab" that will control outside-of-hospital testing for more than two out of three people in Ontario, the group said. The coalition includes owner-operated community laboratories such as Alpha Healthcare, run by former federal Liberal leadership candidate Gerard Kennedy, who is spokesman for the group.

Through the takeover of CML, Lifelabs is "buying the rights to control an essential medical service and take advantage of the Ontario government, patients and the public alike," Mr. Kennedy said in a recent statement.

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Ontario health minister Deb Matthews told the Canadian Press she has no plans to halt the merger because she has been assured the combined company will not close labs or collection centres."

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