Labcorp Is in Talks to Merge Part of Covance With Syneos
(Bloomberg) -- Laboratory Corp. of America Holdings is in talks to combine some of its assets with Syneos Health Inc., according to people with knowledge of the matter.
The companies are discussing a deal in which part of Labcorp’s Covance clinical research division would merge with Syneos, the people said, asking not to be identified because the information is private.
The people said the two North Carolina-based companies are discussing structuring the deal as a so-called Reverse Morris Trust, which provides tax benefits by spinning off an asset before it’s combined. The people said Syneos’s management would run the merged company, although its leadership would include executives from Covance, which has changed its name to Labcorp Drug Development.
The talks are ongoing and there’s no certainty they will lead to a transaction, the people said. The structure of a deal could also still change, they said.
Covance is worth an estimated $18.3 billion, including debt, based on how peers are valued, according to Bloomberg Intelligence.
Representatives for Syneos didn’t immediately respond to messages seeking comment outside regular business hours. A spokesperson for Labcorp declined to comment.
Labcorp said in March that it was running a review of the company’s structure and capital allocation because it felt the stock was undervalued.
Labcorp rose 2.5% to $293.90 at 10:45 a.m. in New York trading Friday, giving the company a market value of about $28.1 billion. In its biggest intraday decline since December, Syneos fell 6.2% to $96.21, giving it a market value of about $10 billion.
A combination would add to a boom in activity involving companies like Syneos that support clinical trials as money pours into the development of new treatments and vaccines.
In April, Thermo Fisher Scientific Inc. agreed to buy PPD Inc., a provider of clinical and research services, for $17.4 billion. In July, buyout firm EQT AB and Goldman Sachs Group Inc.’s investment arm agreed to buy Parexel International Corp. for $8.5 billion.
Investors have favored so-called contract research organizations as a way to gain exposure to pharmaceutical spending without the risk of investing directly in biotech or pharmaceutical companies whose success -- or failure -- rides on the therapies they are testing.
Syneos, whose shares are up 41% this year, is just one beneficiary of that investment surge.
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