The companies said in a Monday statement that the deal will create the world's leading healthcare diagnostics company.
As a result of the transaction, Covance shareholders will receive $75.76 in cash and 0.2686 in LabCorp shares for each Covance share that they own. The deal represents a 32% premium to target's closing price on Friday. Once the deal closes — which is expected to be during the first quarter of 2015 — Covance shareholders will own 15.5% of the combined company. The deal has a 13.3 times multiple over Covance's Ebitda over the last year.
LabCorp said it intends to finance the cash portion of the acquisition through a combination of cash on hand — including Covance's overseas cash — and fully committed debt financing from Bank of America Merrill Lynch and Wells Fargo Bank NA. The acquisition will be in a combination of cash and LabCorp shares which are currently valued at $105.61 with an enterprise value of approximately $5.6 billion.
Burlington, N.C.-based LabCorp specializes in creating diagnostics tests. The company has over 4,000 tests in its portfolio ranging from blood analyses to companion diagnostics, according to the company. In September, LabCorp announced that it was acquiring LipoScience Inc. for $85.3 million. LipoScience provides services to doctors and patients in order to manage cardiovascular disease and diabetes.