Tuesday, March 22, 2011

Investopedia: Quest Diagnostics Opens Its Wallet One More Time

Quest Diagnostics (NYSE:DGX) is certainly not shy about spending shareholders' money to expand its business opportunities. Quest's latest deal, announced Friday morning, will have the company paying $8 per share in cash to acquire all of Celera (NYSE:CRA), a small company with a focus on molecular diagnostics and cardiovascular tests.

The Terms of the Deal
Quest Diagnostics will be paying $8 per share for Celera, a deal that has a sticker price of $671 million but a net cost of $344 million. Moreover, given the tax credits, loss carry-forwards, and capitalized R&D at Celera, the effective price of the deal will be even lower. Nevertheless, the deal represents a nearly 28% premium for Celera, nearly five times trailing sales, and a little more than four-and-a-half times forward sales.

At these prices, Quest is paying a premium similar to what Clarient received from General Electric (NYSE:GE) and superior to the deal Genoptix struck with Novartis (NYSE: NVS). Still, it might be a sobering reminder to MDx fans that the days of companies paying 10 times sales for molecular or esoteric test technology is long past. 

To read the full piece, please continue here:
http://stocks.investopedia.com/stock-analysis/2011/Quest-Diagnostics-Opens-Its-Wallet-One-More-Time-DGX-CRA-GE-NVS-LIFE-LH-ABT-TMO0322.aspx

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