LabCorp to Acquire CRO Covance for $6.1 BillionBy
Laboratory Corporation of America Holdings (LabCorp) has agreed to acquire the contract research organization Covance Inc. for $105.12 per Covance share, or an equity value of approximately $6.1 billion and an enterprise value of approximately $5.6 billion. The combination combines LabCorp’s expertise in healthcare diagnostics company and Covance's leadership in contract research. Under the terms of the agreement, which has been approved by the boards of directors of both companies, Covance shareholders will receive $75.76 in cash and 0.2686 LabCorp shares for each Covance share they own. Covance shareholders will own approximately 15.5% of the combined company.
LabCorp Chairman and Chief Executive Officer David P. King and LabCorp Chief Financial Officer Glenn A. Eisenberg will serve, respectively, as chairman/CEO and CFO of the combined company. Covance Chairman and CEO Joe Herring will lead LabCorp's Covance division and report directly to Mr. King; LabCorp's headquarters in Burlington, North Carolina will be the corporate headquarters of the combined company and Covance's headquarters in Princeton, New Jersey will be the operating headquarters for the Covance division, which will continue to do business under the Covance brand.The transaction is expected to close in the first quarter of 2015 and is subject to Covance shareholder approval, regulatory approvals and customary closing conditions
The combination of LabCorp and Covance will create new sources of revenue and broaden the company's customer base. Revenue of the combined companies will be derived from managed care (32%), pharmaceutical and biotech companies (29%), commercial customers (22%), Medicare/Medicaid (12%), and private patients (5%). The combined company will have established relationships with all of the top 20 pharmaceutical companies and an attractive payor mix.