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LabCorp's $1.2 Billion Chiltern Buyout Gets FTC Approval

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Healthcare diagnostics company Laboratory Corporation of America Holdings LH or LabCorp continues to expand through inorganic means. Apart from huge buyouts like Covance, the company is on a steady spree to add complementary capabilities via strategic mergers.

Following the company’s announcement to acquire analytical testing services business of ChromaDex Corp. CDXC last week, LabCorp is again on the headlines with the earlier-announced impending acquisition of Chiltern International Group Limited, a specialty CRO (contract research organization).

Per the company sources, the Federal Trade Commission (FTC) has granted its request for early termination of the waiting period for Chiltern’s buyout under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). The closing of the acquisition is expected on or around Sep 1, 2017 and is still subject to other customary closing conditions.

Notably, last month, LabCorp had entered into a definitive agreement with Chiltern’s shareholders to purchase the company for an all-cash transaction value of $1.2 billion approximate. Per LabCorp, the consolidation will strengthen its position in innovative diagnostics and drug development solutions.

The buyout of Covance has already demonstrated the value of combining diagnostics with CRO capabilities. With this, LabCorp’s CRO business has grown to nearly $3 billion in annual revenues.

Chiltern’s addition is expected to further promote this development and will also provide LabCorp with enhanced capabilities across a broader client base. The combined entity will have approximately 11,100 employees in the Americas — 7,100 in Europe, the Middle East and Africa, while 2,400 in Asia-Pacific.

With the closure of the transaction, Chiltern will become a part of LabCorp’s Covance segment. The former’s integration will enhance the latter’s offerings. Chiltern will be a major partner serving the top 20 biopharma segments and assist LabCorp to focus on the high-growth emerging and mid-market biopharma segments.

Last three months, LabCorp has been trading above the broader industry. Over this period, the stock has rallied 10.5% as against the industry’s 0.9% loss.

Zacks Rank & Key Picks        

LabCorp carries a Zacks Rank #3 (Hold). Two better-ranked medical stocks are IDEXX Laboratories, Inc. (IDXX - Free Report) and Edwards Lifesciences Corporation EW. Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while IDEXX Laboratories carries a Zacks Rank #2 (Buy). You cansee the complete list of today’s Zacks #1 Rank stocks here.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock has gained around 6.2% over the last six months.

Lantheus Holdings has a long-term expected earnings growth rate of 12.5%. The stock has surged 34.9% over the last six months.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has rallied roughly 19.1% over the last six months.

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