LabCorp said Monday that it will pay $105.12 for each share of the Princeton, New Jersey, company, representing a 32 per cent premium to Covance's closing price Friday. Covance shareholders will receive $75.76 in cash and a portion of LabCorp stock for each share they own. They would hold a nearly 16 per cent ownership stake in the combined company.
The deal totals $5.6 billion, not counting Covance debt.
Laboratory Corporation of America Holdings said the new company will improve patient recruitment for trials, make the research more efficient and deliver drug data faster. LabCorp provides medical testing services through a network of laboratories, while Covance provides drug development services with a focus on nutritional analysis.
LabCorp Chairman and CEO David P. King will lead the combined company while his Covance counterpart, Joe Herring, will lead its Covance division. The headquarters will be in Burlington, North Carolina, where Labcorp is based, and the Covance division will keep its headquarters in Princeton.
Covance also said Monday it earned $66 million in its third quarter. Adjusted earnings came to 98 cents per share.
That matched analyst expectations, according to Zacks Investment Research.
Covance Inc. shareholders still need to approve the deal, which is expected to close in next year's first quarter.
Shares of Covance jumped 25 per cent, or $20.10, to $100 before the opening bell Monday. LabCorp shares closed at $109.29 on Friday and have risen nearly 20 per cent so far this year.