Quest Diagnostics 2011 Annual Report Download - page 87

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Acquisition of Celera Corporation
On March 17, 2011, the Company entered into a definitive merger agreement with Celera Corporation
(“Celera”) under which the Company agreed to acquire Celera in a transaction valued at approximately $344
million, net of $326 million in acquired cash and short-term marketable securities. Additionally, the Company
expects to utilize Celera’s available tax credits, net operating loss carryforwards and capitalized tax research and
development expenditures to reduce its future tax payments by approximately $110 million. Celera is a healthcare
business focused on the integration of genetic testing into routine clinical care through a combination of products
and services incorporating proprietary discoveries. Celera offers a portfolio of clinical laboratory tests and disease
management services associated with cardiovascular disease. In addition, Celera develops, manufactures and
oversees the commercialization of molecular diagnostic products, and has licensed other relevant diagnostic
technologies developed to provide personalized disease management in cancer and liver diseases. Celera generated
revenues of $128 million in 2010.
Under the terms of the definitive merger agreement, the Company, through a wholly-owned subsidiary,
commenced a cash tender offer to purchase all of the outstanding shares of common stock of Celera for $8 per
share in cash. On May 4, 2011, the Company announced that as a result of the tender offer, the Company had a
controlling ownership interest in Celera. On May 17, 2011, the Company completed the acquisition by means of
a short-form merger, in which the remaining shares of Celera common stock that had not been tendered into the
tender offer were converted into the right to receive $8 per share in cash. The Company has accounted for the
acquisition of Celera as a single transaction, effective May 4, 2011.
Through the acquisition, the Company acquired all of Celera’s operations. The Company financed the all-
cash purchase price of $670 million and related transaction costs with borrowings under its existing credit
facilities and cash on hand. Of the total cash purchase price of $670 million, $669 million was paid through
December 31, 2011. Accounts payable and accrued expenses at December 31, 2011 included a liability of $1
million representing the remaining merger consideration related to shares of Celera which had not been
surrendered as of December 31, 2011.
For the year ended December 31, 2011, transaction costs of $8.7 million were recorded in selling, general
and administrative expenses. Additionally, for the year ended December 31, 2011, financing related costs of $3.1
million were recorded in interest expense, net.
The acquisition of Celera was accounted for under the acquisition method of accounting. As such, the assets
acquired and liabilities assumed are recorded based on their estimated fair values as of the date the Company
acquired its controlling ownership interest in Celera. The consolidated financial statements include the results of
operations of Celera subsequent to the Company acquiring its controlling ownership interest which are not
material to the Company’s consolidated results of operations.
The following table summarizes the consideration paid for Celera and the amounts of assets acquired and
liabilities assumed at the acquisition date:
Fair Values
as of
May 4,
2011
Cash and cash equivalents................................... $112,312
Short-term marketable securities . ............................ 213,418
Accounts receivable......................................... 16,810
Other current assets ......................................... 26,796
Property, plant and equipment . . . ............................ 11,091
Intangible assets ............................................ 85,830
Goodwill ................................................... 135,624
Non-current deferred income taxes ........................... 102,838
Other assets . . .............................................. 34,586
Total assets acquired ................................... 739,305
Current liabilities ........................................... 59,008
Long-term liabilities . . . ..................................... 10,717
Total liabilities assumed ................................ 69,725
Net assets acquired ..................................... $669,580
F-15
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)