LabCorp to Acquire Medtox Scientific - Analyst Blog
05 Giugno 2012 - 5:15PM
Zacks
In order to strengthen its foothold
in the toxicology testing business, Laboratory Corporation
of America Holdings (LH) has decided to acquire
Medtox Scientific (MTOX) for $27 per share or a
total enterprise value of $241 million. The offer price represents
a 37% premium over the share price of Medtox as on June 1.
The board of directors of Medtox, a
provider of high quality specialized laboratory testing services
and on-site/point-of-collection testing devices, have unanimously
approved the agreement. The transaction is expected to close in the
third quarter of 2012.
Equipped with a strong cash balance
along with its credit facility in place, LabCorp has been looking
at suitable acquisitions to expand its portfolio. The company
exited the first quarter of fiscal 2012 with cash and short-term
investment of $129.9 million ($159.3 million at the end of 2011)
and $460 million of borrowings outstanding under the $1 billion
revolving credit facility. Cash flow trends of the company remain
robust with free cash flow for the trailing twelve months coming in
at $686.9 million. For fiscal 2012, the operating cash flow
guidance remains at $950 million.
We are encouraged by the company’s
steady focus on pipeline expansion. In order to achieve this
objective, it is also targeting suitable acquisitions in certain
cases. The company is garnering approximately 41% of total revenues
from the specialized testing business (including genomic, esoteric
and anatomic pathology categories), which is expected to gradually
scale up to 45% over the next 3−5 years.
The decision to acquire Medtox is
not new for LabCorp as the company has been following this strategy
over the recent past. In March 2012, the company signed an
exclusive agreement with OPKO Health for intellectual property
associated with a potential Alzheimer's disease diagnostic product.
The company, to its advantage has other significant collaborations
or agreements with leading companies and academic institutions such
as Abbott (ABT) for lung cancer (Xalkori), Duke
University (joint venture in biomarker development and lung
cancer), John Hopkins (melanoma), and Roche
(RHHBY) for melanoma (Zelboraf). Given the continuous focus on
portfolio expansion, we are confident about the company garnering
higher revenues from specialized testing, going forward.
We believe LabCorp’s focus on
acquisitions or agreements to expand specialized testing portfolio
is necessary as its peer Quest Diagnostics (DGX)
is also working towards the same goal. We currently have a Neutral
recommendation on LabCorp over the long term. The stock retains a
short-term Zacks #3 Rank (Hold).
ABBOTT LABS (ABT): Free Stock Analysis Report
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
LABORATORY CP (LH): Free Stock Analysis Report
MEDTOX SCIENTIF (MTOX): Free Stock Analysis Report
(RHHBY): ETF Research Reports
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Grafico Azioni Medtox Scientific, Inc. (MM) (NASDAQ:MTOX)
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Grafico Azioni Medtox Scientific, Inc. (MM) (NASDAQ:MTOX)
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