Houston, TX – (StockNewsDesk) – 11/03/2014 — The month of October has started with Mergers & Acquisitions in the US. Acquisition of two big companies will take place; the first being Covance while the other is the North American Company named Sapient. LabCorp is to buy Covance while Publicis is to buy Sapient.
Publicis Takeover Sapient
The world’s third largest advertising company, Publicis, will buy US-based digital ad company Sapient for $3.7 billion in cash. Publicis intends to capture growth by tapping into the company’s resources. Additionally, the company believes that internet surfing in North America has clearly outpaced the sector in Europe. This will help Publicis compete against giants like Interpublic. Recently, Publicis was in the news when the company fared poorly in finances because of a failed merger with Omnicom. The merger was not successful because of the differences in control and culture.
While many analysts believe that the price paid by Publicis to acquire Sapient is high, some justify the bid price of the company. Publicis will be paying $25 a share, which according to the analysts, coverts to a 44% premium on the current market price. Analysts believe that paying $25 a share, for a company whose growth might have touched the ceiling, is too high. Shareholders of the company, too, did not greet the company’s move. On the contrary, they were expecting a buyback from the company. The share price of the company fell 5%.
Analysts favour the acquisition as it makes more sense to acquire Sapient and not buy back their own shares. Sapient will add more value to the business. Publicis also said that they will consider paying off dividends and offering buybacks sometime during November.
With this acquisition the enterprise value of Sapient will be 12 times compared to that of Publicis’ multiple of 8 times. A major chunk of Publicis’ revenue comes from digital marketing. Digital marketing contributed 38.4% of the company’s revenue. This year, the company aims to take the figure to 50%. Sapient’s acquisition will help the company meet that figure. With the Sapient takeover, revenue of Publicis will increase from all sides. This includes digital marketing, online marketing, brand building, exposure to social networks and major customers.
LabCorp Takeover Covance
LabCorp will be acquiring Covance for $6.1 billion through a cash and stock deal. To the combined company, managed care will meet 32% of the revenue while 22% of the revenue will come from commercial customers. Biotech and pharmaceutical companies earn 29% of the revenues while 12% and 5% will come from Medicare/Medicaid and private patients. For fiscal 2014, Covance expects to report revenue of $2.6 billion, while LabCorp may earn revenue of $6 billion.
LabCorp will be paying a premium of 32% of the Covance share price. The acquisition will happen in the form of $75.76 in cash. Additionally, for every Covance share held 0.2686 shares of LabCorp will be given. The shareholders became bullish on Covance as the share price went up by 26%, while the share price of LabCorp came down by 8.4%.