Antony Currie and Robert Cyran explain why the bloodwork firm's $6.1 bln deal for Covance has questionable strategic rationale – and why it's overpaying by some $700 mln.
So does an exciting Yemeni news coming out of the blood work industry would you believe the lap cope. One of my main companies that testing blood and other. Love me some that we give the doctors as just spent six point one billion on car events from Syria and you're looking at this deal. This year reckoned this test pulls to the value destruction was going on here. I'm sort Covanta Covanta runs clinical trials were pharma companies they want to help new drug they find the patients they tested percent of adults are gonna do with testing and not not much of the company tried valiantly to describe the this this synergies they say okay for instance. What do a lot of tests on people so if you have a rare genetic condition may be that the companies that can do a trial so they can find they can query database now seems quite well at the very far fetched for a purpose and also prepped legalese some issues looking it there may be a problem with. The main problem is just they paid too much they've paid their premium about one point four billion dollars for the company right and these savings are worth about 700 millions that's something to say come foxes and also as a big at a premium books SAT percent of covenants which etc. but it's not just the Dolan is the the percentage amount. Media minute and then we have. Outs in nothing more than enough flowing through from the film costs it yet and it's not quite sell market marked down. My corp shares 700 million about Europe are repaid so what rationale could there be for this to pull it at any imminent fear of a live contestant world that could be part of the reason I'm there's the upstart called fairness which I'm in Silicon Valley this it's it's one young leading it and she most of the Steve Jobs she's made this very huge tank system where they can. It is to go into drugstores they take very very small mind of you know they test me give you results very quickly and it's it's far far cheaper overseas units currently present your rounds of twenty days and I don't I was if I don't have dinner at. The faster want to preserve its if it's interesting and and it could be that they're looking at that it could still looking for revenue growth I'm under obamacare it. More people are getting tested or the prices are coming down etc. it's not blood testing isn't necessarily great business in the future so it they're diversifying my news this. I erupt thanks so we assume that we'll keep an eye on the deal and and it was coming through this week and we'll be back with more breaking east tomorrow.