Laboratory Corporation of America Holdings (LabCorp) Snatches Up Covance Inc. For $6.1 Billion
November 3, 2014
By Mark Terry, BioSpace.com Breaking News Staff
Laboratory Corporation of America , better known as LabCorp, the second largest clinical diagnostics company in the U.S., announced today that it will acquire Princeton, N.J.-based Covance for $6.1 billion.
Covance is a contract research organization (CRO) that provides services for drug development and animal testing.
Both companies’ boards have approved the deal. Under the agreement, Covance shareholders will receive $75.76 in cash and 0.2686 shares of LabCorp for each Covance share. The deal will allow LabCorp a larger international audience, as well as access to significant clinical trial support business.
Revenue is expected to be broken down as 32 percent from managed care, 29 percent from pharmaceutical and biotech companies, 22 percent from commercial clients, 12 percent from Medicare/Medicaid, and 5 percent from private patients.
“This transaction provides LabCorp with immediate scale and a comprehensive market-leading platform in the $141 billion biopharmaceutical research & development market, while at the same time achieving the new sources of revenue, broader payor mix, and greater internationalpresence we have long pursued,” said David King, LabCorp chairman and chief executive in a press release. “Covance also has market access and nutritional businesses that we view as great growth opportunities. By joining our highly compatible and complementary capabilities, the combined company will be an industry leader in both the laboratory and CRO spaces, characterized by global scale, enhanced offerings, new efficiencies, broader and deeper customer relationships, and a differentiated business model.”
King will continue to run the combined company as chairman and CEO. LabCorp Chief Financial Officer Glenn Eisenberg will continue as CFO of the combined company. Joe Herring, chief executive and chair of Covance, will run LabCorp’s Covance division from its headquarters in Princeton, reporting directly to King. The combined companies’ headquarters will still be in Burlington, N.C.
“We are thrilled to join forces with another industry leader through a transaction that delivers to our shareholders substantial immediate cash value along with a meaningful stake in a combined company with exciting growth opportunities,” said Herring in a statement. “Covance generates more safety and efficacy data for the approval of innovative medicines than any other company in the world, and LabCorp has longitudinal diagnostic data from more than 75 million patients.”
LabCorp has long been in competition with the U.S.’s largest clinical diagnostic company, Quest Diagnostics.
The last two decades have displayed numerous rounds of acquisitions by both companies, causing speculation by analysts that there were few remaining clinical diagnostic companies worth acquiring. In January 2014 Quest acquired Solstas Lab Partners for $570 million, notable because it was based in Greesnboro, N.C., very close to LabCorp headquarters.