Covance Inc. (NASDAQ:CVD) and LabCorp (NASDAQ:LH) say that they are aiming to build a giant, medical diagnostics company. In order to achieve this aim, LabCorp (NASDAQ:LH), the medical testing company, will buy out Covance Inc. (NASDAQ:CVD), the medical research firm, in $6.1 billion in total, which will be paid in cash as well as shares. Several transactions have occurred in the healthcare industry so as to help companies acquire greater market shares in the services and products that they offer. In the series of healthcare industry transactions, this agreement between Covance Inc. (NASDAQ:CVD) and LabCorp (NASDAQ:LH) is the latest.

In the premarket trade on Monday, Covance Inc. (NASDAQ:CVD)’s shares increased by almost 30% to arrive at a value of $103.36. The closing price of the stock on Friday was $79.90. On Friday, LabCorp (NASDAQ:LH)’s shares closed at $109.29.

LabCorp (NASDAQ:LH), based in Burlington, North Carolina, will be paying $105.12 for each share of Covance Inc. (NASDAQ:CVD), the firm based in Princeton, New Jersey. This price is at a 32% premium on the closing price of Covance Inc. (NASDAQ:CVD)’s shares on Friday.

The boards of both companies have settled the deal; Covance Inc. (NASDAQ:CVD)’s shareholders will receive $75.76 in cash and 0.2686 in shares, for each share of Covance Inc. (NASDAQ:CVD), from LabCorp (NASDAQ:LH). The investors of Covance Inc. (NASDAQ:CVD) will then have about 15.5% ownership in the new, combined firm.

Laboratory Corporation of America Holdings, or LabCorp, (NASDAQ:LH), said that the combined firm will improve the recruitment procedure of patients for trials. The new company will also focus on delivering drug data faster and making their research more efficient. LabCorp (NASDAQ:LH) has a network of labs that provides services in medical testing. Covance Inc. (NASDAQ:CVD) focuses on drug development, with emphasis on nutritional analyses.

The combined company will be Burlington-based. The Covance division of LabCorp (NASDAQ:LH) will have its headquarters in Princeton, where it will continue to perform business under the Covance Inc. (NASDAQ:CVD) brand.

David King, the current CEO and Chairman of LabCorp (NASDAQ:LH), will resume his dual posts in the new company as well. LabCorp (NASDAQ:LH)’s CFO, Glenn Eisenberg, will also remain at his post. Meanwhile, Joseph Herring, the current CEO of Covance Inc. (NASDAQ:CVD), will be in charge of the Covance division in the new company. He will be accountable to David King.

After a vote by the Covance Inc. (NASDAQ:CVD) shareholders and other regulatory approvals, the deal between Covance Inc. (NASDAQ:CVD) and LabCorp (NASDAQ:LH) will close in the first quarter of 2015.

According to David King, the deal will give his company a leading edge in the biopharmaceutical R&D market worth $141 billion. At the same time, the company will achieve scale and new sources of income and revenue. The deal will bring LabCorp (NASDAQ:LH) the international presence that they have sought to achieve for so long.

Herring said that the two companies together will have growth opportunity.  The combination of Covance Inc. (NASDAQ:CVD)’s safety and LabCorp (NASDAQ:LH)’s diagnostic data will lead to more cost-effective healthcare services all over the globe.

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