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US Oncology: The Prognosis Is Buyout

It isn't often that a stock sends out signals that it's a takeover target. But US Oncology (USON) is one of those rarities. A provider of cancer-care services to 77 cancer centers and 850 doctors in 26 states, US Oncology was formed by the 1999 merger of American Oncology Resources and Physician Reliance Network. Of late, its stock has warmed right up--climbing from 3.95 on Oct. 3 to 7.85 on Dec. 19: An investor group, Welsh, Carson, Anderson & Stowe--led by Russell Carson, a member of US Oncology's board--has upped its stake to 10.3%.

The stock hit 10 in early March but slid to 6 after September 11. It fell even further, to 4, after the company announced a restructuring on Sept. 30. That's when the Welsh Carson group started scooping up shares. In its filing with the Securities & Exchange Commission, the group said it might "explore a possible acquisition." Obviously Carson, who knows the company well, is betting a lot of money that US Oncology's "restructuring will lead to greater profitability and a higher stock price," notes Charles LaLoggia, editor of the Superstock Investor, a Rochester (N.Y.) newsletter. Welsh Carson has a record of acquiring big stakes in small medical companies and then taking them private. It looks as if the group will do another deal, says LaLoggia, who figures US Oncology is worth 12 to 13 a share in a buyout. By Gene G. Marcial

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