LabCorp Climbs on Report Company May Be a Buyout Target

Laboratory Corp. of America Holdings, which provides medical testing services, rose the most in almost four years as investors bet the company may be the target of a private equity buyout.

LabCorp gained 4.5 percent to $87.90 at the close in New York, the biggest increase since October 2008, 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. If a deal is in the works, it’s probably in the very early stages based on LabCorp’s statement, said Kevin Ellich, an analyst with Piper Jaffray & Co.

“You really have to think they don’t know anything at this point,” said Ellich. “It could be really early. The possibility does exist that private equity is preparing to put an offer together to present to the company, but that is pure speculation.”

Market Value

LabCorp might go for $100 a share in a private equity buyout, a 19 percent premium over yesterday’s closing share price, said Citigroup Inc. analyst Gary Taylor in a note yesterday. LabCorp had a market value of $8.1 billion based on yesterday’s closing price, data compiled by Bloomberg show.

LabCorp offers testing services for doctors, hospitals and pharmaceutical companies. Rival Quest Diagnostics Inc. also may be targeted by private equity, Taylor and Ellich said.

A spokesman at Bank of America declined to comment, while a LabCorp spokesman didn’t return calls seeking additional comment. Quest spokeswoman Wendy Bost said the Madison, New Jersey-based company doesn’t comment on rumor and speculation.

Quest fell less than 1 percent to $58.26.

Private equity buyers may need to put up $3 billion to $4 billion of equity capital for a purchase of LabCorp, according to the Debtwire 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 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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE