Laboratory Corp. of America Holdings, which provides medical testing services, rose the most in almost three years as investors bet the company may be the target of a private equity buyout.
LabCorp gained 4.8 percent to $88.11 at 9:56 a.m. New York time. The shares climbed as much as 5.2 percent to $88.50, the biggest intraday increase since September 2009, after Debtwire reported the Burlington, North Carolina-based company may be bought. LabCorp said today in a statement it has “no knowledge of any such plans” and is not in talks on a deal.
Bank of America Corp. is heading efforts to raise capital for the buyout, according to the report from Debtwire, which didn’t identify the source of the information. LabCorp may go for $100 a share, a 19 percent premium over yesterday’s closing share price, said Citigroup Inc. analyst Gary Taylor in a note yesterday. Quest Diagnostics Inc. also could be targeted by private equity, Taylor said.
“We continue to believe that an LBO of either LabCorp or Quest is financially plausible,” Taylor said.
LabCorp offers testing services for doctors, hospitals and pharmaceutical companies. A spokesman at Bank of America declined to comment, while a LabCorp spokesman didn’t return calls seeking additional comment.
LabCorp had a market value of $8.1 billion based on yesterday’s closing price, data compiled by Bloomberg show.
Private equity buyers may need to put up $3 billion to $4 billion of equity capital for the purchase, according to the report. Among firms that have the wherewithal to make a bid for LabCorp are TPG Capital and Bain Capital Partners, according to the report which did not say the two firms are considering making a bid. Other potential acquirers include Blackstone Group LP (BX) and KKR & Co. LP. Officials at the funds couldn’t immediately be reached to comment.
Private equity firms have been the most-active acquirers of laboratory, medical testing, and research services companies in the past five years, accounting for almost $6 billion of the $19 billion in takeovers in the sector, data compiled by Bloomberg show. Carlyle Group LP and Hellman & Friedman’s $3.4 billion takeover of Pharmaceutical Product Development Inc. last year was the largest takeover in the sector, the data show.
Quest, based in Madison, New Jersey, rose less than 1 percent to $58.92.