Quest Diagnostics Inc. DGX has recently agreed to purchase the laboratory outreach service business of MemorialCare Health System – an acclaimed U.S.-based non-profit healthcare provider, with the majority of its operations in the Los Angeles and Orange counties. Financial terms of the deal have been kept under wraps.
The transaction is in line with the company’s five-point strategy, which includes restoring growth and driving disciplined capital deployment through strategically aligned, accretive acquisitions.
Per the terms of the deal, MemorialCare Health System’s outreach laboratory diagnostics will be integrated into Quest Diagnostics’ accredited full-service clinical laboratory; situated in West Hills, CA. However, MemorialCare Health System's hospital-based laboratories will remain out of the purview of the transaction.
On completion of the deal, a large number of patients and physicians will be able to access Quest Diagnostics’ extensive menu of innovative services, including next generation sequencing, and Quest Diagnostics’ competent network of nearly 200 patient service centers in southern California.
Management is enthusiastic about this acquisition as it will allow the company to serve a larger number of physicians and patients in South California, who will be benefited from the company’s sophisticated diagnostic insights. We believe this acquisition will thus expand Quest Diagnostics' customer base, particularly in the said region and rake in higher profits at the company.
Management hopes to complete the acquisition in Aug 2015. The buyout is expected to be neutral to Quest Diagnostics’ earnings in 2015.
Over the past few years, strategic acquisitions have served as a compelling investment tool for Quest, expanding its geographical reach and benefiting its customer base. Since 2012, to date, Quest Diagnostics has invested approximately $1 billion in acquisitions. We believe such acquisitions also exhibit the company’s strong cash position to fund the same.
Currently, Quest carries a Zacks Rank #3 (Hold). Some other better-ranked medical stocks include Amedisys Inc. AMED, AmSurg Corp. AMSG and DaVita HealthCare Partners Inc. DVA. While Amedisys sports a Zacks Rank #1 (Strong Buy), AmSurg and DaVita Healthcare hold a Zacks Rank #2 (Buy).
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