Covance entered a definitive agreement to be acquired by diagnostic company Laboratory Corporation of America under a cash and stock deal valued at approximately $6.1 billion, the companies announced Monday. Covance CEO Joe Herring said the transaction “delivers to our shareholders substantial immediate cash value along with a meaningful stake in a combined company with exciting growth opportunities.”
Under the deal, which has been approved by the boards of both companies, Covance shareholders will receive $75.76 in cash and 0.2686 LabCorp shares for each Covance share they own. The transaction is valued at $105.12 per Covance share, representing a 32 percent premium to the company’s closing share price on October 31. The companies indicated that Covance shareholders will own approximately 15.5 percent of the combined business.
Herring, who will lead LabCorp’s Covance division after the acquisition closes, said the “combination leads the way to more cost-effective healthcare by improving the safety and efficacy of drug therapies, enabling accurate patient diagnostics, and advancing evidence-based medicines. ” According to the companies, the combined business “will leverage technologies that improve patient recruitment for clinical trials, enhance efficiency in the conduct of clinical trials, and deliver data faster to drug sponsors, physicians, and patients.”
LabCorp CEO David P. King indicated that LabCorp has a large database of patients that it can use to recruit people for clinical trials of drugs run by Covance. “While we’re sensitive to the privacy aspects of that, it gives a tremendous recruiting tool to recruit and fill trials more rapidly,” the executive commented. King will serve as CEO of the combined company, while LabCorp’s current chief financial officer Glenn A. Eisenberg will remain in the position at the new entity.
The transaction is expected to close in the first quarter of 2015, after which Covance’s headquarters in Princeton, New Jersey will be the operating headquarters for the Covance division.