BURLINGTON – Life science giant Labcorp , which over the years has swollen into a global venture through mergers and acquisitions, is about to get smaller, disclosing plans today to spin off its Clinical Development business as a separate company.
The result: “two independent, publicly traded companies, each poised for strong, sustainable growth,” the Burlington-based firm says.
The move comes after years of growth by increasing revenues from services and products but also through buying other firms. It now has more than 70,000 employees worldwide and produces revenues of $14 billion a year.
It’s made 42 acquisitions over the years, including 11 over the past five years, according to Mergr.com. The biggest was the $6.2 billion deal for Covance in 2014. As currently structured Labcorp is valued at more than $23 billion with shares trading at nearly $247. However share price has declined this year from more than $313 as of Dec. 31, 2021.
- MORE COVERAGE: Read the full announcement online.
Investors reacted quickly and positively to the news with LabCorp (NYSE: LH) shares rising more than $2.50 – or just over 1% – in pre-market trading.
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It’s a tax-free transition, however, with Labcorp shareholders retaining control of the new venture. And Labcorp’s headquarters will remain in Burlington, the company said. Labcorp also has numerous operations across the Research Triangle region and across North Carolina.
“Spinning off the Clinical Development business will benefit customers and shareholders by creating two standalone businesses that are poised to accelerate growth and focus resources on distinct strategic priorities, customer needs and value creation,” said Adam Schechter, chairman and CEO of Labcorp.
Schechter will remain chair and CEO, the company noted.
“Our shareholders will be able to participate in the upside potential of two market-leading businesses in the global healthcare sector, each of which will be well-capitalized and positioned to generate sustainable growth with strong free cash flows and attractive returns. Our customers will continue to have access to our full range of capabilities with the same quality and seamless delivery of services they have come to expect from our teams,” he added. “Today is a testament to our long history of growth through innovation and track record of delivering on our mission to improve health and improve lives.”
However, some decisions remain to be made such as:
- Board of directors
- Executive leadership beyond the CEO/chairman
- Name for the spun-off venture
As desccribed by Labcorp, the independent companies have these missions:
- Labcorp: A leading global laboratory business comprising the Company’s routine and esoteric labs, central labs and early development research labs, all of which are leaders with deep scientific expertise, vast health data and insights, and an extensive, advanced global laboratory network.
- The Clinical Development Business: A leading, global Contract Research Organization (CRO) providing Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.
The company also cited three factors in making the decision:
- Strengthened strategic flexibility and operational focus to pursue specific market opportunities and better meet customer needs.
- Focused capital structures and capital allocation strategies to drive innovation and growth.
- A more targeted investment opportunity for different investor bases.
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