Quest Diagnostics Completes Acquisition of LifeLabs, Enhancing Access to Diagnostic Innovation
Rhea-AI Summary
Quest Diagnostics has completed its acquisition of LifeLabs from OMERS for approximately CAN $1.35 billion (USD $1 billion), including net debt. The transaction aims to enhance access to diagnostic innovation in North America. LifeLabs will continue to operate under its brand with the same management team and headquarters, while benefiting from Quest's expertise and resources.
The acquisition is expected to generate about CAN $970 million (USD $710 million) in annual revenues. It is anticipated to be slightly dilutive to GAAP EPS but $0.10-$0.15 accretive to adjusted EPS in the first 12 months after closing. Quest will provide updated financial guidance for 2024 in its Q3 earnings call in October.
Positive
- Acquisition valued at approximately CAN $1.35 billion (USD $1 billion)
- Expected to generate CAN $970 million (USD $710 million) in annual revenues
- Anticipated to be $0.10-$0.15 accretive to adjusted EPS in the first 12 months
- Enhances access to specialized diagnostic services in Canada
- Strengthens Quest's presence in the North American market
Negative
- Slightly dilutive to GAAP earnings per share due to amortization of intangibles
- Integration challenges may arise from combining two large organizations
News Market Reaction
On the day this news was published, DGX gained 0.22%, reflecting a mild positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
"This acquisition brings together two industry leaders committed to enhancing access to diagnostic innovation for patients in
Quest provides a comprehensive offering of tests requiring specialized skills, science, and technology in clinical areas such as cardiometabolic health, infectious diseases, Alzheimer's disease, oncology and genomics.
"Joining forces with Quest Diagnostics marks a pivotal moment for LifeLabs. Quest's extensive diagnostic capabilities and forward-thinking strategy will help the LifeLabs team enhance access to services and ultimately improve healthcare for Canadians," said Charles Brown, President and CEO of LifeLabs.
LifeLabs and its more than 6,500 employees will continue to operate under the LifeLabs brand and with the same management team and headquarters. Quest will provide LifeLabs with new expertise, innovations and resources to strengthen the services provided by LifeLabs. In addition to fostering greater access to specialized tests, the two companies will work together to improve online appointment scheduling and speed patient service centre processing. Quest will also support LifeLabs' data security enhancements while ensuring Canadian patients' health data remains in Canada.
"OMERS is proud to have supported and fostered LifeLabs' growth into the prominent Canadian healthcare institution it is today," said Michael Hill, Executive Vice President and Global Head of OMERS Infrastructure. "This transaction represents a significant achievement for OMERS and its members. We extend our best wishes to Quest and LifeLabs as they embark on their shared journey towards future success and innovation supporting patient care."
Transaction Details
Quest has acquired
Advisors
McCarthy Tétrault LLP served as legal advisor to Quest Diagnostics. Blake, Cassels & Graydon LLP served as legal advisor to OMERS. Evercore and CIBC Capital Markets served as financial advisors to OMERS.
About LifeLabs
LifeLabs is
About OMERS
OMERS is a jointly sponsored, defined benefit pension plan, with 1,000 participating employers ranging from large cities to local agencies, and over 600,000 active, deferred and retired members. Our members include union and non-union employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children's aid societies across
About Quest Diagnostics
Quest Diagnostics works across the healthcare ecosystem to create a healthier world, one life at a time. We provide diagnostic insights from the results of our laboratory testing to empower people, physicians and organizations to take action to improve health outcomes. Our nearly 50,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives and create a healthier world. www.QuestDiagnostics.com.
Note on Non-GAAP Financial Measures
In this press release, we (Quest Diagnostics or the Company) present financial information with respect to our projected adjusted EPS following the expected acquisition of LifeLabs. Projected adjusted EPS is a non-GAAP financial measure, with projected diluted EPS as its most comparable GAAP financial measure. In calculating projected adjusted EPS we exclude special items such as restructuring and integration charges, amortization expense, excess tax benefits ("ETB") associated with stock-based compensation, gains and losses associated with changes in the carrying value of our strategic investments, and other items from projected diluted EPS. Projected adjusted EPS should not be considered as an alternative to projected diluted EPS. Management is presenting projected adjusted EPS because it believes it is useful to investors and analysts to evaluate the impact of the expected acquisition of LifeLabs. The Company believes that a quantitative reconciliation of projected adjusted EPS to projected diluted EPS cannot be presented at this time without unreasonable efforts due to the unpredictability and uncertainty of the amounts and timing of events affecting the items we exclude from projected diluted EPS, including acquisition-related transaction and integration costs, the purchase price allocation which is performed based on facts and circumstances as of the acquisition closing date, and the accounting treatment and valuation of intangible assets that are expected to be acquired. Material changes to any one of the items could result in a significant adjustment from projected diluted EPS.
Forward Looking Statements
The statements in this press release which are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management's current projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, risks and uncertainties related to Quest's proposed acquisition of LifeLabs, including adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in Quest's most recent filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and in any of its subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports.
View original content to download multimedia:https://www.prnewswire.com/news-releases/quest-diagnostics-completes-acquisition-of-lifelabs-enhancing-access-to-diagnostic-innovation-302230039.html
SOURCE Quest Diagnostics
FAQ
What is the value of Quest Diagnostics' acquisition of LifeLabs?
How will the LifeLabs acquisition affect Quest Diagnostics' (DGX) earnings?
What is the expected annual revenue from the LifeLabs acquisition for Quest Diagnostics (DGX)?
Will LifeLabs continue to operate under its own brand after the acquisition by Quest Diagnostics (DGX)?
