In late July, Laboratory Corp. of America Holdings (NYSE: LH) announced the 6th CRO deal to surpass the $1 billion mark this year. The $1.2 billion deal for Chiltern is its third announced transaction this year, having acquired Mount Sinai’s Clinical Outreach Laboratories (January) and Pathology Associates Medical Laboratories, LLC (February).
Despite activity in the Laboratory, MRI & Dialysis sector, LabCorp was on the hunt for a CRO target all year, but with little luck. Back in February, it was rumored that LabCorp was looking to buy Pharmaceutical Product Development, LLC for $8 billion. PPD ended up going to Hellman & Friedman LLC, a long time investor in the company, for $9.05 billion. Then, just a month ago, more rumors swirled that LabCorp was outbid by Pamplona Capital Management LLP for its $5.2 billion acquisition of PAREXEL International Corporation (NASDAQ: PRXL).
In the second half of the year, LabCorp confirmed its interest in the outsourced research market when it finally landed a deal with Chiltern, a privately-held CRO based in Slough, United Kingdom. Chiltern provides clinical services and solutions in a variety of therapeutic areas with engagement models for biopharmaceutical and medical device industries in 47 countries.
LabCorp paid approximately $1.2 billion for Chiltern in an all-cash deal, and expects to fund the transaction with a combination of bank financing and bonds. Based on Chiltern’s forecasted 2017 revenue and adjusted EBITDA, the multiples work out to 2.18x and 12.63x, respectively.
Once the transaction is complete, Chiltern will become part of LabCorp’s Covance segment. LabCorp acquired Covance in November 2014 for $5.6 billion. Covance is now a major division, offering global drug development services company to the pharma and biotech industries. The acquisition creates leading oncology expertise, leveraging Covance’s extensive experience in late phase with Chiltern’s expertise in early clinical development. The deal also adds comprehensive capabilities in medical device development.
