Labcorp Announces Initiatives to Enhance Shareholder Value
Board of Directors Approves Plans to Initiate Quarterly Cash Dividend and Authorizes $2.5 Billion Share Repurchase Program
Capital Allocation Plan Enables Continued Investments in Key Growth Areas, Science and Innovation
BURLINGTON, N.C., Dec. 9, 2021 — Labcorp (NYSE: LH) (the Company), a leading global life sciences company, today announced actions that its Board of Directors (the Board) and management team have taken to enhance shareholder returns. This includes:
- Initiating a dividend in the second quarter of 2022. The Board is targeting a dividend payout ratio of between 15-20% of adjusted earnings;
- Authorizing a $2.5 billion share repurchase program. As part of this program, $1 billion will be repurchased under an accelerated share repurchase plan;
- Implementing a new LaunchPad business process improvement initiative, targeting savings of $350 million over the next three years;
- Providing a longer-term outlook in connection with the announcement of Labcorp’s 2021 year-end results in addition to the Company’s annual guidance;
- Providing additional business insights through enhanced disclosures beginning with Labcorp’s first quarter 2022 results; and
- Continuing a commitment to profitable growth through investments in science, innovation and new technologies.
The above actions follow the conclusion of Labcorp’s thorough review of its structure and capital allocation strategy, as announced in March 2021. As part of the comprehensive review, extensive discussions were held with third parties and the Board considered a wide range of options, including significant acquisitions, divestitures, spinning off businesses, as well as spinning and merging those businesses with strategic partners. The Board unanimously concluded that the Company’s existing structure is in the best interest of all stakeholders at this time and represents compelling opportunities to grow and create significant shareholder value. Management and the Board are committed to continuing to evaluate all avenues for enhancing shareholder value.
Labcorp’s updated capital allocation plan:
- Enables the Company to continue to invest in key growth areas such as oncology, Alzheimer’s, autoimmune and women’s health;
- Fuels growth through innovation by using Labcorp’s unparalleled data and insights to bring scientific advancements—both Labcorp-developed, as well as those of other scientists—to market at scale;
- Reflects the Board’s confidence in Labcorp’s strong balance sheet and cash flow generation profile; and
- Demonstrates the Board’s commitment to deploying capital to enhance value for shareholders, patients, providers and pharmaceutical customers worldwide who rely on Labcorp to help make health care decisions that lead to better outcomes.
“We are positioning Labcorp to play an important role in the future of global health care through science and innovation, while delivering strong returns for our shareholders,” said Adam Schechter, chairman and CEO of Labcorp. “Our work since early 2020 through the pandemic is just one example of how our unique capabilities lead to innovation, growth and game-changing solutions. We are well positioned to accelerate our growth in additional areas such as oncology, Alzheimer’s, autoimmune and women’s health, while also investing in other areas, including cell and gene therapy and liquid biopsy.”
“The initiation of a dividend and new share repurchase program will enable us to enhance returns to shareholders while maintaining financial flexibility to continue investing in key higher-growth opportunities,” said Glenn Eisenberg, executive vice president and chief financial officer. “With a strong, balance sheet, liquidity and a commitment to maintaining investment grade ratings, Labcorp will continue to capitalize on our unique platform to drive profitable growth and enhanced value for shareholders.”
The new share repurchase program approved by the Board authorizes the Company to repurchase an additional $2.5 billion of common stock, which includes the repurchase of $1 billion of common stock on an accelerated schedule. The Board will regularly review this capital return policy in connection with a balanced capital allocation strategy.
Goldman Sachs & Co. LLC and Barclays served as Labcorp’s financial advisors and Jones Day served as legal counsel.