Toronto-based pension fund Ontario Municipal Employees Retirement System (OMERS) has reached a deal to sell the country’s largest medical testing company, LifeLabs Medical Laboratory Services, to U.S.-based Quest Diagnostics Inc. for $1.35-billion including debt.

LifeLabs will keep its brand, its Canadian headquarters and its management team after the acquisition closes, which is expected to happen by the end of the year, subject to regulatory approvals. Quest also plans to keep patients’ health data stored in Canada, according to a joint statement.

LifeLabs is Canada’s leading laboratory testing company, performing 112 million tests each year at 382 collection centres and 16 laboratories in Ontario, British Columbia and Saskatchewan and employing 6,500 staff. After the deal closes, Canada’s highly concentrated market for lab testing will be even further controlled by U.S. owners.

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.

Secaucus, N.J.-based Quest is buying all of LifeLabs using cash and debt, and expects LifeLabs will generate about $970-million in annual revenue.

OMERS has owned LifeLabs for 17 years, and The Globe and Mail reported in January that the pension fund had put the testing company up for sale, drawing interest from multiple bidders. OMERS pitched LifeLabs to potential buyers as an infrastructure-sector investment, with dependable revenues from providing medical services to an aging population.

The two leading contenders were Quest and Vaughan, Ont.-based Andlauer Healthcare Group, which runs a medical logistics business that delivers drugs to pharmacies and hospitals, and appeared to represent the best chance for LifeLabs to stay Canadian-owned.

By May, Quest emerged as the frontrunner after a six-month auction, outbidding Andlauer by $100-million. The sale took months to negotiate because OMERS and the bidders were seeking to settle long-term contracts setting out the prices for tests with the Ontario Ministry of Health, which is LifeLabs’ largest customer. Other large clients include insurance companies, and both have pushed laboratory testers and other medical suppliers to cut costs.

“Our purchase in 2007 and subsequent investments have helped LifeLabs grow into a great Canadian success story,” said Michael Hill, OMERS’s global head of infrastructure, in a statement. “Quest is uniquely equipped to expand the service offering at LifeLabs, bringing new innovations to this market while extending access for patients in Canada.”

OMERS manages about $129-billion on behalf of approximately 600,000 Ontario public-service workers, including nurses, firefighters and police officers.

LifeLabs and Quest already have business relationships through which Quest provided some advanced tests, and LifeLabs participated in a Global Diagnostic Network to share expertise, led by Quest.

“This transaction is predicated on our strong belief that we can help LifeLabs accelerate growth and improve healthcare,” said Jim Davis, Quest’s chairman, chief executive officer and president, in a company statement.

Evercore and CIBC World Markets Inc. served as financial advisors to OMERS, which had legal advice from Blake, Cassels & Graydon LLP. McCarythy Tétrault LLP advised Quest.