LabCorp to buy Covance for $6.1 billion
FBN’s Ashley Webster breaks down the details of LabCorp’s $5.6 billion acquisition of Covance.
Laboratory Corp of America Holdings, a major provider of healthcare diagnostic services, said it would buy Covance Inc for about $6.1 billion in cash and stock to expand into the contract clinical trial business.
Covance's drug development outsourcing services help pharmaceutical companies cut costs by eliminating the need to maintain in-house laboratories.
Covance shareholders will receive $75.76 in cash and 0.2686 LabCorp shares for each share held.
The offer of $105.12 per share represents a premium of 32 percent to Covance's closing price on Friday.
The enterprise value of the deal is about $5.6 billion, including Covance's long-term debt of $250 million and excluding cash and cash equivalents of $705 million at the end of September.
Excluding one-time costs, LabCorp said it expected the deal to add to adjusted earnings per share in 2015 before synergies, and save over $100 million within three years of closing.
LabCorp Chief Executive David King will serve as CEO of the combined company after closing of the deal, expected in the first quarter of 2015.
LabCorp said it intend to finance the deal with cash in hand and debt financing from BofA Merrill Lynch and Wells Fargo Bank.
Lazard, BofA Merrill Lynch and Wells Fargo Securities LLC are financial advisers to LabCorp, while Sullivan & Cromwell LLP and Hogan Lovells are legal advisers.
Goldman Sachs & Co is the financial adviser to Covance, while Cravath, Swaine & Moore LLP is legal counsel. Covington & Burling LLP is serving as its antitrust counsel.
(Reporting by Natalie Grover in Bangalore; Editing by Sriraj Kalluvila)