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LabCorp Agrees to Acquire Assets of Pathology Inc.

NEW YORK (GenomeWeb) — Laboratory Corporation of America announced today that it has agreed to acquire the operating assets of women's health laboratory Pathology Inc.

The terms of the deal were undisclosed.

The deal encompasses all of Pathology's operating assets, including its patient service centers, LabCorp said in a statement. The Torrance, California-based Pathology provides expertise in reproductive FDA donor testing, as well as anatomic, molecular, and digital pathology services, LabCorp added.

LabCorp CEO David King said that Pathology is "known for quality, science, and innovation in women's health testing," adding, "it is an excellent fit with LabCorp's existing women's health service offerings." 

King also noted that the transaction meets LabCorp's financial criteria of "being accretive to earnings in year one and earning our cost of capital by year three."

The company expects to close the deal in the first quarter of 2016.

Investment bank Evercore ISI reiterated its Buy rating for LabCorp today, saying that the Pathology acquisition will supplement LabCorp's organic growth. "We expect that given the size of the base business, this will provide less than 1 percent of incremental growth but represents a solid tuck-in," wrote Evercore Managing Director Micheal Cherny in a note. "All-in we expect LH to continue to supplement core operating growth, with incremental volumes providing a solid return on the bottom-line given the fixed cost infrastructure."

Goldman Sachs recently downgraded LabCorp to Neutral from its Americas Conviction Buy List based on mixed execution in its recently acquired Covance business unit. Goldman also became bearish on the idea that LabCorp could benefit from the trend of cost-conscious health providers flocking to low-cost labs.

LabCorp was down a fraction of 1 percent at $122.53 in mid-morning trading on the Nasdaq.