LabCorp, a global life sciences company, and Chiltern, a specialty CRO, announced that LabCorp will acquire Chiltern pursuant to a definitive agreement with Chiltern’s shareholders in an all-cash transaction valued at approximately $1.2 billion. Once the transaction is complete, Chiltern will become part of LabCorp’s Covance segment.

“This acquisition strengthens our position as a leading life sciences company that delivers innovative diagnostics and drug development solutions to improve health and improve lives,” said David P. King, chairman and CEO of LabCorp. “Our acquisition of Covance has demonstrated the value of combining diagnostic and CRO capabilities, expertise, data and leadership. The addition of Chiltern furthers our strategy and will provide us with enhanced capabilities across a broader client base as we continue to innovate and grow.”

Chiltern has a 35-year track record of growth as a provider of clinical services and solutions in multiple key therapeutic areas, with engagement models for biopharmaceutical and medical device companies. It has more than 4,500 employees around the world, including Asia-Pacific, and has conducted more than 1,800 studies across 87 countries in the last five years. Chiltern is a leading CRO among emerging-to-mid biopharma customers, with forecasted 2017 revenue and adjusted EBITDA of approximately $550 million and $95 million, respectively, and backlog of approximately $1 billion.

“Joining LabCorp and Covance will allow Chiltern to expand its collaborative approach to bring better, more personalized therapies to market for patients every day,” said Jim Esinhart, Ph.D., CEO of Chiltern. “Customers will benefit from the expanded capabilities this provides and our employees will have a greater opportunity to propel research into the future with strong, supportive partners.”

“Since LabCorp acquired Covance, we have grown the CRO business to nearly $3 billion in annual revenue,” said John Ratliff, CEO of Covance. “We now join with Chiltern to create a market-leading CRO, with more than 20,000 talented employees around the world. The addition enhances Covance’s offerings as a major partner serving the top 20 biopharma segment and expands our current offering to include a dedicated focus on the high-growth emerging and mid-market biopharma segments. We are very pleased to welcome the Chiltern team to the LabCorp family as we work together to realize the promise of this unique and powerful combination.”

Strategic Highlights

• Creates a leading CRO, with significant global scale
• The diversified global footprint of the combined company provides significant growth opportunity.
• The combined company has approximately 11,100 employees in the Americas; 7,100 employees in Europe, the Middle East and Africa; and 2,400 employees in Asia-Pacific.
• Provides diverse customer base with strong growth potential across all client segments
• Covance has a strong presence serving the top 20 biopharma companies.
• Chiltern is a leading CRO among emerging-to-mid market biopharma customers.
• Together, the combined company has broad offerings and enhanced growth potential across all client segments.
• Extends expertise and capabilities in key high-growth therapeutic and specialty areas
• The acquisition creates leading oncology expertise, leveraging Covance’s extensive experience in late phase with Chiltern’s deep expertise in early clinical development.
• Chiltern adds comprehensive capabilities in medical device development.
• Expands portfolio of flexible clinical development solutions tailored to customers’ needs
• The addition of Chiltern strengthens Covance’s clinical development capabilities with full programmatic and robust FSP offerings, including expanded clinical monitoring, biometrics and safety FSP solutions.
• Chiltern’s endpoint suite of interactive response technology complements Covance’s Xcellerate clinical trial technology suite.

Transaction Details

The transaction meets LabCorp’s financial criteria. Excluding one-time costs relating to the transaction and with the benefit of cost synergies, the company expects it to be accretive to adjusted earnings per share and free cash flow in year one, and to earn its cost of capital by year three.

The acquisition is an all-cash transaction, which LabCorp expects to fund with a combination of bank financing and bonds. Following this transaction, LabCorp expects to maintain its investment-grade credit ratings.

The transaction is subject to regulatory approvals and customary closing conditions, and is expected to close in the fourth quarter, 2017.