QUEST DIAGNOSTICS INC (Form: 8-K, Received: 07/03/2024 09:18:53)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): July 2, 2024

Quest Diagnostics Incorporated

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or other jurisdiction of incorporation)


001-12215		16-1387862
(Commission File Number)		(I.R.S. Employer Identification No.)

500 Plaza Drive
Secaucus, NJ		07094
(Address of principal executive offices)		(Zip Code)

	(973) 520-2700
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	DGX	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01. Entry into a Material Definitive Agreement

On July 2, 2024, Quest Diagnostics Incorporated (the “Company”) and 1000923563 Ontario Inc., a subsidiary of the Company (the “Buyer”), entered into an Equity Purchase Agreement (the “Agreement”) with Borealis Infrastructure Corporation, a corporation incorporated under the federal laws of Canada (“Borealis”), BPC Health Trust, a trust organized under the laws of the Province of Ontario (together with Borealis, the “Sellers”), LifeLabs Inc., a corporation incorporated under the federal laws of Canada (“LifeLabs”), and BPC Lab Finance LP, an Ontario limited partnership (“BPC LP” and together with LifeLabs, the “Target Entities”). The Target Entities provide laboratory diagnostic information and digital health connectivity systems in Canada.

Pursuant to the Agreement, the Buyer has agreed to acquire from OMERS, a jointly sponsored, defined benefit pension plan, all of the issued and outstanding common shares of LifeLabs and all of the partnership interests of BPC LP (the “Proposed Transaction”) for a cash purchase price (the “Purchase Price”) based on a value of approximately 1.35 billion Canadian Dollars (approximately 985 million U.S. Dollars), including net debt, subject to customary purchase price adjustments. The Company guarantees the obligations of the Buyer under the Agreement. The closing of the Proposed Transaction is subject to certain closing conditions, including obtaining consents from certain key customers of LifeLabs and clearance under the Competition Act (Canada) and there not being any notice or order in effect under the Investment Canada Act which prohibits closing. The Buyer will be required to pay a termination fee if the Agreement is terminated for reasons related to the failure to obtain such approvals within a time frame agreed among the parties, provided that the failure to obtain such approvals was not primarily due to breach of any provision of the Agreement by the Sellers or the Target Entities.

The Agreement also contains certain representations and warranties with respect to the Target Entities and restrictive covenants regarding the operation of the business of the Target Entities during the period from the date of the Agreement through the closing of the Proposed Transaction (the “Interim Period”). The Agreement also includes covenants requiring the Sellers or the Target Entities not to knowingly take any action to encourage, initiate or engage in discussions or negotiations with, provide any information to or enter into an agreement with anyone else concerning the acquisition of the Target Entities or a similar transaction, during the Interim Period.

The Proposed Transaction is expected to close by the end of the year, subject to satisfaction of certain closing conditions and approvals, including receipt of the consents and closing conditions described above. The foregoing description of the Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Agreement, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024.

Forward-Looking Statements

The statements in this Current Report on Form 8-K which are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management’s current projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, risks and uncertainties related to the completion of the Proposed Transaction, including satisfaction of the regulatory approvals and other closing conditions. Readers should also consider the other factors discussed in the Company’s most recent filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and in its subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the “Business,” “Risk Factors,” “Cautionary Factors that May Affect Future Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those reports.

Item 7.01 Regulation FD Disclosure

On July 3, 2024, the Company issued a press release announcing it entered into the Agreement. A copy of the press release is furnished hereto as Exhibit 99.1 and is hereby incorporated into this Item 7.01 by reference.

Item 9.01. Financial Statements and Exhibits


d.	Exhibit	Description

	99.1	Press release of Quest Diagnostics Incorporated, dated July 3, 2024
	104	The cover page from this current report on Form 8-K, formatted in Inline XBRL

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

July 3, 2024


	QUEST DIAGNOSTICS INCORPORATED

	By:	/s/ Sean D. Mersten
		Sean D. Mersten
		Vice President and Corporate Secretary

Exhibit 99.1

Quest Diagnostics to Acquire LifeLabs from OMERS,
Enhancing Diagnostic Services for Canadians

Secaucus, NJ and Toronto, Canada — July 3, 2024— Quest Diagnostics (NYSE: DGX), a leading provider of diagnostic information services, today announced a definitive agreement with OMERS to acquire LifeLabs, a trusted provider of community laboratory tests for millions of Canadians, for a value of approximately CAN $1.35 billion (approximately USD $985 million), including net debt.

“Quest has supported laboratories, hospitals and academic centres in Canada with specialized testing services for over two decades, including during the COVID-19 pandemic,” said Jim Davis, Chairman, CEO and President, Quest Diagnostics. “This transaction is predicated on our strong belief that we can help LifeLabs accelerate growth and improve healthcare. We are committed to working with the LifeLabs team to ensure service continuity and enhance access and innovation to meet the needs of Canada’s growing and aging population.”

LifeLabs will retain its brand, Canadian headquarters, and management after the acquisition is closed. Quest will provide LifeLabs with new expertise, innovations and resources to strengthen the services provided by LifeLabs’ more than 6,500 employees. This will include improved online appointment scheduling and faster patient service centre processing. Quest also expects to help accelerate LifeLabs’ data security enhancements while ensuring Canadian patients’ health data remains in Canada.

“OMERS is proud to have supported LifeLabs’ growth over the last 17 years. Our purchase in 2007 and subsequent investments have helped LifeLabs grow into a great Canadian success story,” said Michael Hill, Executive Vice President and Global Head of Infrastructure of OMERS. “Quest is uniquely equipped to expand the service offering at LifeLabs, bringing new innovations to this market while extending access for patients in Canada.”

Quest has recently introduced several new tests requiring specialized skills, science, and technology, including in Alzheimer’s disease, women’s health (particularly prenatal and hereditary genetics), oncology and advanced cardiometabolic health.

“Quest is the right partner to build on the strengths of LifeLabs and align with our strategic path, which focuses on enhancing the accessibility and quality of services that we provide to millions of Canadians,” said Charles Brown, President and CEO, LifeLabs. “We know and respect Quest, as we share similar cultures and values and a productive test-reference relationship. Together, we’ll grow LifeLabs and provide more Canadians with access to the advanced diagnostics they rely on, closer to home. We sincerely thank OMERS for its investment, leadership, and valued collaboration over 17 years.”

The two companies already have an established relationship. Over the past five years, LifeLabs has participated in the Quest-led Global Diagnostic Network, which connects 12 of the leading diagnostic testing labs globally to broaden testing access and share expertise. LifeLabs and Quest also have a reference relationship through which Quest provides access to select advanced diagnostic tests.

Transaction Details

Quest will acquire 100% of the equity of LifeLabs and expects to fund the acquisition through cash on hand and debt. The company expects the transaction to generate approximately CAN $970 million (approximately USD $710 million) in annual revenues and to be slightly dilutive to GAAP earnings per share (EPS), due primarily to amortization of intangibles and other items, but accretive to adjusted EPS in the first 12 months after closing.

The transaction meets all of Quest’s criteria on growth, profitability and returns. The parties expect to complete the transaction by the end of the year, subject to certain customary closing conditions and approvals, including Canadian regulatory approvals. Additional terms were not disclosed.

Advisors

McCarthy Tétrault LLP served as legal advisor to Quest Diagnostics. Blake, Cassels & Graydon LLP served as legal advisor to OMERS. Evercore and CIBC Capital Markets served as financial advisors to OMERS.

About LifeLabs

LifeLabs is Canada’s leading provider of laboratory diagnostic information and digital health connectivity systems, enabling patients and healthcare practitioners to diagnose, treat, monitor and prevent disease. We are a committed innovator in supporting Canadians to live healthier lives, operating Canada’s first commercial genetics lab, and the country’s largest online patient portal, with more than 8 million Canadians receiving their results online. LifeLabs has been named one of Canada’s Best Employers (2021, 2022 and 2023) and Best Employers for Diversity (2022 and 2023) by Forbes and recognized for having an award-winning Mental Health Program from Benefits Canada. Learn more at lifelabs.com.

About OMERS

OMERS is a jointly sponsored, defined benefit pension plan, with 1,000 participating employers ranging from large cities to local agencies, and over 600,000 active, deferred and retired members. Our members include union and non-union employees of municipalities, school boards, local boards, transit systems, electrical utilities, emergency services and children’s aid societies across Ontario. OMERS teams work in Toronto, London, New York, Amsterdam, Luxembourg, Singapore, Sydney and other major cities across North America and Europe – serving members and employers, and originating and managing a diversified portfolio of high-quality investments in bonds, public and private credit, public and private equities, infrastructure and real estate.

About Quest Diagnostics

Quest Diagnostics works across the healthcare ecosystem to create a healthier world, one life at a time. We provide diagnostic insights from the results of our laboratory testing to empower people, physicians and organizations to take action to improve health outcomes. Our nearly 50,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives and create a healthier world. www.QuestDiagnostics.com.

Note on Non-GAAP Financial Measures

In this press release, we (Quest Diagnostics or the Company) present financial information with respect to our projected adjusted EPS following the expected acquisition of LifeLabs. Projected adjusted EPS is a non-GAAP financial measure, with projected diluted EPS as its most comparable GAAP financial measure. In calculating projected adjusted EPS we exclude special items such as restructuring and integration charges, amortization expense, excess tax benefits (“ETB”) associated with stock-based compensation, gains and losses associated with changes in the carrying value of our strategic investments, and other items from projected diluted EPS.

Projected adjusted EPS should not be considered as an alternative to projected diluted EPS. Management is presenting projected adjusted EPS because it believes it is useful to investors and analysts to evaluate the impact of the expected acquisition of LifeLabs. The Company believes that a quantitative reconciliation of projected adjusted EPS to projected diluted EPS cannot be presented at this time without unreasonable efforts due to the unpredictability and uncertainty of the amounts and timing of events affecting the items we exclude from projected diluted EPS, including acquisition-related transaction and integration costs, the purchase price allocation which is performed based on facts and circumstances as of the acquisition closing date, and the accounting treatment and valuation of intangible assets that are expected to be acquired. Material changes to any one of the items could result in a significant adjustment from projected diluted EPS.

Forward Looking Statements

The statements in this press release which are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management’s current projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, risks and uncertainties related to Quest’s proposed acquisition of LifeLabs, including satisfaction of the regulatory and other closing conditions, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in Quest’s most recent filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and in any of its subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the “Business,” “Risk Factors,” “Cautionary Factors that May Affect Future Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those reports.

For More Information

Quest Diagnostics Contacts: Investors: Shawn Bevec: 973-520-2900 and Media:

Peter Block, Partner, FGS Longview 416-904-2120 or peter.block@fgslongview.com or mediacontact@questdiagnostics.com

OMERS: Vanessa Naughton, Associate Director, Investment Communications, +1-416-356-2827 or media@omers.com

SOURCE Quest Diagnostics