Burlington-based Laboratory Corporation of America plans to buy Covance in a deal worth some $6.1 billion.

The acquisition would form what LabCorp is calling “the world’s largest healthcare diagnostics company” with more than $8 billion in annual revenues. 

LabCorp (NYSE: LH), which has numerous offices across the Triangle area, and Covance (NYSE: CVD) announced the deal early Monday. LabCorp recently announced plans to acquire Raleigh-based LipoScience in a deal valued at $85 million. 

Covance is based in Princeton, N.J.

LabCorp’s top executive David King will lead the combined company.

LabCorp provides a wide variety of life science-related lab and testing services.

“This transaction provides LabCorp with immediate scale and a comprehensive market-leading platform in the $141 billion biopharmaceutical research and development market, while at the same time achieving the new sources of revenue, broader payor mix, and greater international presence we have long pursued,” King said in a statement.

“Covance also has market access and nutritional businesses that we view as great growth opportunities. By joining our highly compatible and complementary capabilities, the combined company will be an industry leader in both the laboratory and CRO spaces, characterized by global scale, enhanced offerings, new efficiencies, broader and deeper customer relationships, and a differentiated business model. Combining with Covance is fully aligned with our five pillar strategy and broadens our portfolio consistent with our vision of being a trusted partner to healthcare stakeholders, providing knowledge to optimize decision-making, improve health outcomes, and reduce treatment costs.”

Covance is a major international drug development firm and also offers nutritional analysis. 

“Together, the combined company will be the leading provider of medical testing as well as the premier full-service drug development organization partnering with customers across a broad continuum from biopharmaceutical research to drug and diagnostic development to commercialization,” LabCorp said in the announcement. 

Covance CEO Joe Herring, will lead LabCorp’s Covance division. 

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 percent, or $20.10, to $100 before the opening bell Monday. LabCorp shares closed at $109.29 on Friday and have risen nearly 20 percent so far this year.

The announcement follows:

LabCorp to Acquire Covance for Approximately $5.6 Billion, Creating World’s Leading Healthcare Diagnostics Company

Laboratory Corporation of America® Holdings (LabCorp®) (NYSE: LH) and Covance Inc. (NYSE: CVD) today announced that they have entered into a definitive agreement under which LabCorp will acquire Covance for cash and LabCorp shares currently valued at $105.12 per Covance share, or an equity value of approximately $6.1 billion and an enterprise value of approximately $5.6 billion. The combination will create the world’s leading healthcare diagnostics company, capitalizing on LabCorp’s industry leadership in medical testing and Covance’s leadership in contract research. Under the terms of the agreement, which has been approved by the Boards of Directors of both companies, Covance shareholders will receive $75.76 in cash and 0.2686 LabCorp shares for each Covance share they own. Covance shareholders will own approximately 15.5% of the combined company.

The agreed price represents a 32% premium to Covance’s closing stock price of $79.90 on October 31, 2014 and a multiple of approximately 13.3 times Covance’s EBITDA over the last 12 months through September 30, 2014. Excluding one-time costs, LabCorp expects the transaction to be accretive to adjusted earnings per share in 2015 before synergies. LabCorp expects to achieve annual cost synergies in excess of $100 million to be fully realized within three years of closing.

LabCorp provides leading-edge medical laboratory testing and services through a national network of primary clinical laboratories and specialty testing laboratories. Covance is the world’s most comprehensive drug development company and a leader in nutritional analysis. Together, the combined company will be the leading provider of medical testing as well as the premier full-service drug development organization partnering with customers across a broad continuum from biopharmaceutical research to drug and diagnostic development to commercialization.

Combination Will Drive Innovation and Efficiencies to Improve Physician and Patient Outcomes

The combined company will leverage technologies that improve patient recruitment for clinical trials, enhance efficiency in the conduct of clinical trials, and deliver data faster to drug sponsors, physicians, and patients. Covance’s innovative risk-based patient monitoring tools will significantly enhance LabCorp’s existing capabilities in predictive analytics, benefitting at-risk patients, risk-bearing physicians, and payors. The combined company’s range of innovative offerings will advance personalized medicine, improve the development of therapeutics, and enable its pharmaceutical customers to revolutionize drug commercialization. Additionally, the combined company will leverage the increased scale of its central laboratory operations and collective data resources to drive greater R&D productivity for its clients.

Combination Will Create New Sources of Revenue and Broaden Customer Base

The combination of LabCorp and Covance will create new sources of revenue and broaden the company’s customer base. Revenue of the combined companies will be derived from managed care (32%), pharmaceutical and biotech companies (29%), commercial customers (22%), Medicare/Medicaid (12%), and private patients (5%). The combined company will have established relationships with all of the top 20 pharmaceutical companies and an attractive payor mix.

Combination Will Enhance Cash Flow to Fund Growth and Future Capital Returns to Shareholders

Over the last 12 months through September 30, 2014, the combined business had pro forma revenue of $8.4 billion, adjusted EBITDA of $1.6 billion and free cash flow of over $700 million. The combined company will have approximately 20% of revenue derived from outside the United States. With strong and stable cash flow, additional payors and revenue sources, as well as superior financial resources as a combined company, LabCorp will have a strong platform for organic growth and acquisitions. The Company expects to maintain its investment grade ratings with this acquisition. In addition, free cash flow will be used to pay down debt quickly, providing future cash flow to return capital to shareholders.

LabCorp Chairman and Chief Executive Officer David P. King and LabCorp Chief Financial Officer Glenn A. Eisenberg will serve, respectively, as Chairman/CEO and CFO of the combined company. Covance Chairman and CEO Joe Herring will lead LabCorp’s Covance division and report directly to Mr. King. LabCorp’s headquarters in Burlington, North Carolina will be the corporate headquarters of the combined company and Covance’s headquarters in Princeton, New Jersey will be the operating headquarters for the Covance division, which will continue to do business under the Covance brand.

(The Associated Press contributed to this report.)