-- Transaction will Improve Quality, Access and
Convenience for Customers --
TETERBORO, N.J., FEB. 9, 1999Quest Diagnostics Incorporated (NYSE: DGX), a
leading provider of diagnostic testing, information and services, announced today that it
has signed a definitive agreement to acquire the clinical laboratory operations of
SmithKline Beecham plc (NYSE: SBH) for approximately $1.3 billion in cash and stock.
Under the terms of the agreement, which was approved by the Boards of Directors of both
companies, Quest Diagnostics will acquire SmithKline Beecham Clinical Laboratories (SBCL),
including its clinical testing operations, clinical trials testing, corporate health
services, and laboratory information products businesses. SBCLs national testing and
service network consists of regional laboratories, specialty testing operations and its
Genetics Testing Center, as well as a number of rapid-turnaround or "STAT"
laboratories, and patient service centers. SBCL had 1998 revenues of $1.6 billion. As part
of the transaction, SmithKline Beecham and Quest Diagnostics will enter into a long-term
contract under which Quest Diagnostics will be the exclusive provider of testing to
support SmithKline Beechams clinical trials testing requirements worldwide.
Pursuant to the agreement, SmithKline Beecham will receive approximately $1.0 billion
in cash and 12.6 million newly issued shares of Quest Diagnostics common stock. At
closing, SmithKline Beecham will hold approximately 29.5% of the outstanding shares of
Quest Diagnostics. The acquisition is expected to accelerate Quest Diagnostics
earnings growth rate, generate savings exceeding $100 million annually after three years,
and be accretive to earnings in 2000, before anticipated charges related to the
transaction.
"In the rapidly changing world of health care, this transaction will enable us to
become a more successful company by providing higher value for customers in a
cost-effective way," said Kenneth W. Freeman, Chairman and Chief Executive Officer of
Quest Diagnostics. "As with consolidations occurring elsewhere in the healthcare
industry, including physician practices, hospitals, managed care organizations and
pharmaceutical companies, this acquisition is a necessary response to widespread pressure
to provide an increased level of services for our customers in a cost-sensitive
environment."
Quest Diagnostics expects the transaction to produce a broad range of benefits for
customers, including: improved quality, convenience and accessibility; expanded test
development for healthcare consumers; and more dynamic laboratory data and information
products to help providers and insurers better manage their patients health.
"This acquisition will enable Quest Diagnostics to dramatically improve patient
care as we move into the 21st Century by providing the resources and critical
mass needed to accelerate the development of database and information tools," said
Mr. Freeman.
The transaction, which is expected to be completed early in the second half of 1999, is
subject to the satisfaction of customary conditions, including approval by Quest
Diagnostics stockholders, regulatory review and receipt of financing for the cash portion
of the purchase price. Merrill Lynch and Bank of America have jointly committed to provide
full financing. As part of the transaction, SmithKline Beecham will receive two seats on
the Quest Diagnostics Board of Directors and has agreed to certain standstill provisions
in connection with its ownership of Quest Diagnostics common stock. SmithKline Beecham
will also indemnify Quest Diagnostics for potential liability arising from certain
government and private claims against SBCL.
Quest Diagnostics is one of the nation's leading providers of diagnostic testing,
information and services to physicians, hospitals, managed care organizations, employers
and government agencies with 1998 revenues of $1.5 billion. The wide variety of tests
performed on human tissue and fluids help doctors and hospitals diagnose, treat and
monitor disease. Its Nichols Institute unit conducts research, specializes in esoteric
testing using genetic screening and other advanced technologies, performs clinical studies
testing, and manufactures and distributes diagnostic test kits and instruments. Quest
Informatics collects and analyzes laboratory, pharmaceutical and other data to help large
healthcare customers identify and monitor patients who are at-risk for certain diseases.
Additional company information can be found on the Internet at: www.questdiagnostics.com.
The statements in this press release which are not historical facts or information may
be forward-looking statements. These forward-looking statements involve risks and
uncertainties that could cause the outcome to be materially different. Certain of these
risks and uncertainties are listed in the Quest Diagnostics Incorporated 1997 Form 10-K
and subsequent filings.