Leading diagnostics player Quest Diagnostics (DGX) has initiated the tender offer for all the outstanding shares of Celera Corporation (CRA) for $8 per share in cash. The tender offer will expire on April 25, 2011.
The tender offer is subject to certain conditions, including the tender of a majority of the outstanding shares, and the receipt of certain other regulatory approvals.
Earlier this month, Quest decided to acquire Celera for $8 per share, representing a transaction value of $344 million, after considering $327 million of cash and short-term investments. Moreover, the transaction value will be lower based on realization of a significant portion of Celera’s available tax credit, carry forward of net operating loss and capitalized R&D, which amounted to $117 million at the end of 2010.
Through the acquisition of Celera, Quest plans to strengthen its footing in molecular diagnostics discovery and development. Celera’s proprietary genetic tests, pipeline of biomarkers, along with esoteric cardiovascular test, offered by Berkeley HeartLab should drive Quest’s revenues.
Celera, with revenues of $128 million in 2010, is expected to add just over 1% to Quest’s 2011 revenue growth. The transaction is expected to close in the second quarter of 2011 and would have an insignificant impact on its earnings in 2011.
For the last few years, Quest has been strengthening its foothold in the esoteric testing market. Gene-based and esoteric testing now accounts for 22% of the company’s total revenues in 2010, up from 9% in 2000. Earlier, in February 2011, Quest decided to acquire Athena Diagnostics from Thermo Fisher Scientific (TMO) for $740 million.
Athena, with $110 million in revenues in 2010, provides diagnostic tests for neurological and other diseases with an emphasis on gene-based tests. Although Quest has been witnessing a decline in revenues derived from anatomic pathology, the company recorded a 3% growth in gene-based and esoteric testing during the fourth quarter, driven primarily by sales to hospitals and specialist physicians.
We are currently Neutral on Quest, which also corresponds to the Zacks #3 Rank (Hold) in the short-term.
CELERA CORP (CRA): Free Stock Analysis Report
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
THERMO FISHER (TMO): Free Stock Analysis Report
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