SECAUCUS, N.J. and TORONTO - Quest Diagnostics (NYSE: NYSE:DGX), a prominent provider of diagnostic information services, has completed its purchase of LifeLabs, a leader in the Canadian diagnostics field, from OMERS. The deal, which includes net debt, is valued at approximately CAN $1.35 billion (USD $1 billion).
Jim Davis, CEO of Quest Diagnostics, emphasized the unification of two industry leaders and their commitment to enhancing diagnostic services in North America. The acquisition is expected to foster growth and improve patient care, particularly for Canada's growing and aging population. Quest is known for its specialized lab services in areas such as cardiometabolic health, infectious diseases, and genomics.
LifeLabs, with over 6,500 employees, will retain its brand, management team, and headquarters in Canada. Quest's acquisition aims to strengthen LifeLabs by providing new expertise and innovations, including improvements to online appointment scheduling and patient service center processing. Quest also plans to assist in enhancing LifeLabs' data security, ensuring that Canadian patients' health data remains within the country.
The transaction is projected to yield approximately CAN $970 million (USD $710 million) in annual revenues for Quest. While the acquisition is expected to be slightly dilutive to GAAP earnings per share due to amortization and other items, it is anticipated to be $0.10-$0.15 accretive to adjusted earnings per share in the first year post-closing.
OMERS, the seller, expressed pride in LifeLabs' growth under its ownership and conveyed best wishes to both organizations for their future endeavors.
Quest Diagnostics plans to provide updated financial guidance for the full year 2024 on its third-quarter earnings call in October 2024. The details of the transaction have not been fully disclosed.
Legal advisement for the acquisition was provided by McCarthy Tétrault LLP to Quest Diagnostics, and Blake, Cassels & Graydon LLP to OMERS. Evercore and CIBC Capital Markets served as OMERS' financial advisors.
This news is based on a press release statement.
In other recent news, Quest Diagnostics is set to acquire select assets of the outreach laboratory services business from University Hospitals, Ohio, pending regulatory approvals. This acquisition is expected to finalize in the fourth quarter of 2024. Additionally, Quest Diagnostics has reported strong second quarter results for 2024, with total revenue increasing by 2.5% to $2.99 billion. The company's full-year 2024 financial guidance anticipates revenues between $9.5 billion and $9.58 billion, with reported EPS ranging from $7.57 to $7.77.
In the wake of these positive results, Mizuho maintained an Outperform rating on Quest Diagnostics and raised the price target to $160 from $155. Furthermore, Quest Diagnostics has announced a global collaboration with BD (Becton, Dickinson and Company) to develop flow cytometry-based companion diagnostics, aimed at enhancing treatment selection for cancer patients and those with other diseases. These recent developments underscore Quest Diagnostics' commitment to growth and innovation in the healthcare diagnostics market.
InvestingPro Insights
Quest Diagnostics (NYSE: DGX) has shown a robust financial performance with a market capitalization of $17.09 billion, underscoring its position as a major player in the diagnostics sector. The company's commitment to returning value to shareholders is evident through its consistent dividend policy, having raised its dividend for 13 consecutive years and maintained payments for 21 consecutive years, reflecting a dividend yield of 1.95% as of the last payout.
InvestingPro Tips highlight the company's strategic financial management, with aggressive share buybacks demonstrating confidence in the company's value proposition. Additionally, Quest Diagnostics trades with low price volatility, providing a relatively stable investment option in the healthcare services market. It's also noteworthy that the company is trading near its 52-week high, with a price percentage of that high at 99.84%, indicating strong market confidence.
From an earnings perspective, while some caution may be warranted with 12 analysts having revised their earnings downwards for the upcoming period, Quest Diagnostics remains profitable over the last twelve months, and analysts predict profitability to continue this year. The P/E ratio stands at 20.39, which may suggest a higher valuation relative to near-term earnings growth, but this could be balanced by the company's stable earnings and dividend track record.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at InvestingPro's dedicated page for Quest Diagnostics (https://www.investing.com/pro/DGX), providing further insights into the company's financial health and market performance.
The acquisition of LifeLabs is set to bolster Quest's revenue streams, with the transaction projected to yield around $710 million in annual revenues. This strategic move is expected to enhance Quest's service offerings and expand its presence in North America, positioning the company for continued growth in the evolving healthcare landscape.
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