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$LH Labcorp Spin Off Opportunity!
Laboratory Corporation of America announced last Thursday that they will be spinning off their clinical development business tax-free to shareholders.

This is an exciting opportunity for investors who want to take advantage of the valuation discrepancy while it's still around.

Labcorp is currently made up of two businesses: clinical diagnostics and clinical drug development. Clinical diagnostics can be valued very similar to Quest Diagnostics which is the largest competitor to Labcorp and is very similar to Labcorp's diagnostics business.

Labcorp's EV/EBIDTA multiple is 9.39 and Quest's $DGX is 9.80

This literally does NOT add up, since Labcorp has embedded in its business a contract research organization, formerly Covance, that should be trading at a much higher multiple. A similar CRO is $IQV IQVIA Holdings which has an EV/EBIDTA multiple of 16.68!

Using logical sense, you would think Labcorp would be trading at 9.39+16.68/2= around a 17 EV/EBIDTA multiple, however, it's trading at 9 which is basically valuing Labcorp as if their CRO business is non-existent.

This is exactly why Adam Schechter CEO of $LH plans to spin off their CRO business sometime in mid-2023 tax-free.

A prudent investor could take advantage of this valuation discrepancy by investing in $LH before the spin-off at a lower multiple.
pharmaphorum
Labcorp unveils plan to spin out clinical development business
Laboratory Corp of America (Labcorp) has announced that it plans to separate its clinical development business into an independent, publicly-traded contract research organisation (CRO). The move will return Labcorp to its core lab testing business and central laboratory network and will allow each company to "benefit from its own capital structure, enhanced investor alignment through a more targeted investment opportunity and a differentiated value proposition," said chief executive Adam Schechter on a conference call.

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