Quest Diagnostics announces a definitive agreement to acquire LifeLabs, Canada’s leading community laboratory testing provider, for approximately USD $985 million, marking a significant expansion into the Canadian healthcare market.
Key points:
- LifeLabs will retain its brand, Canadian headquarters, and management after the acquisition, with Quest providing new expertise and resources to enhance services.
- The acquisition is expected to generate approximately CAN $970 million (USD $710 million) in annual revenues for Quest Diagnostics.
- The transaction is subject to Canadian regulatory approvals and is expected to close by the end of the year.
Market estimate: The global clinical laboratory services market was valued at $208.04 billion in 2022 and is expected to grow at a CAGR of 5.8% from 2023 to 2030, according to Grand View Research.
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In a strategic move that reshapes the North American diagnostic landscape, Quest Diagnostics (NYSE: DGX) announced today its plans to acquire LifeLabs, Canada’s leading provider of community laboratory tests, for approximately USD $985 million. This landmark deal marks Quest’s significant expansion into the Canadian healthcare market and strengthens its position as a global leader in diagnostic information services.
Jim Davis, Chairman, CEO and President of Quest Diagnostics, emphasized the company’s long-standing relationship with Canada, stating, “Quest has supported laboratories, hospitals and academic centres in Canada with specialized testing services for over two decades, including during the COVID-19 pandemic.” Davis expressed confidence that the acquisition would accelerate LifeLabs’ growth and improve healthcare delivery in Canada.
The acquisition, valued at CAN $1.35 billion including net debt, is expected to generate approximately CAN $970 million (USD $710 million) in annual revenues for Quest Diagnostics. This substantial financial injection is poised to bolster Quest’s market presence and service capabilities in the rapidly growing clinical laboratory services sector.
In a move aimed at maintaining continuity and leveraging local expertise, LifeLabs will retain its brand, Canadian headquarters, and management post-acquisition. Quest plans to enhance LifeLabs’ services by introducing improved online appointment scheduling, faster patient service centre processing, and accelerated data security enhancements.
Charles Brown, President and CEO of LifeLabs, expressed enthusiasm about the partnership, stating, “Quest is the right partner to build on the strengths of LifeLabs and align with our strategic path, which focuses on enhancing the accessibility and quality of services that we provide to millions of Canadians.”
The acquisition also promises to bring Quest’s innovative diagnostic capabilities to the Canadian market. Quest has recently introduced several new tests requiring specialized skills and technology, including in Alzheimer’s disease, women’s health, oncology, and advanced cardiometabolic health.
For OMERS, the current owner of LifeLabs, this deal marks the end of a successful 17-year investment. Michael Hill, Executive Vice President and Global Head of Infrastructure of OMERS, expressed pride in LifeLabs’ growth during their ownership and confidence in Quest’s ability to further expand the company’s service offerings.
The transaction is expected to close by the end of the year, subject to Canadian regulatory approvals and other customary closing conditions. Quest plans to fund the acquisition through cash on hand and debt, anticipating the deal to be slightly dilutive to GAAP earnings per share but accretive to adjusted EPS in the first 12 months after closing.
As the global clinical laboratory services market continues to expand, with projections reaching $208.04 billion in 2022 and expected growth at a CAGR of 5.8% from 2023 to 2030, this acquisition positions Quest Diagnostics to capitalize on the growing demand for advanced diagnostic services in North America.
The merger of Quest’s innovative capabilities with LifeLabs’ established presence in Canada promises to enhance healthcare delivery and diagnostic accessibility for millions of Canadians, potentially setting a new standard for laboratory services in the region.
