8-KOther EventsExhibits & Filings

QUEST DIAGNOSTICS INC 8-K Report, Corporate Update (Feb 2, 2011)

Filed February 2, 2011For Securities:DGX

Summary

Quest Diagnostics Incorporated (DGX) announced on January 31, 2011, a significant share repurchase program and a related public offering involving an affiliate of GlaxoSmithKline plc. The company agreed to repurchase approximately 15.4 million shares of its common stock from SB Holdings Capital, Inc. at a price of $54.30 per share, totaling approximately $835 million. This buyback is expected to be funded through a combination of existing cash and borrowings under credit facilities. Concurrently, the company is facilitating a public offering by the Selling Stockholder of a similar number of shares. Quest Diagnostics is not selling any shares in this offering and will not receive any proceeds. However, the company will cover most expenses related to the offering, excluding underwriting discounts and commissions. Investors should note that this transaction significantly impacts the company's capital structure, utilizing a substantial amount of cash and potentially increasing leverage, while also reducing outstanding share count.

Key Highlights

  • 1Quest Diagnostics to repurchase 15,377,551 shares of common stock from SB Holdings Capital, Inc. (an affiliate of GlaxoSmithKline plc).
  • 2Aggregate purchase price for the share repurchase is approximately $835.0 million.
  • 3Repurchase price per share is $54.30.
  • 4Funding for the repurchase will come from approximately $260.0 million in cash and borrowings under available credit facilities.
  • 5The company is facilitating a public offering by the Selling Stockholder of 15,377,600 shares of common stock.
  • 6Quest Diagnostics will not receive any proceeds from the Selling Stockholder's public offering but will pay all associated expenses (excluding underwriting discounts/commissions).
  • 7The share repurchase and the public offering are expected to close on February 4, 2011.

Frequently Asked Questions

The filing does not explicitly state the strategic reason for the share repurchase. However, share repurchases are typically undertaken to return capital to shareholders, reduce the number of outstanding shares (potentially increasing earnings per share), and signal confidence in the company's financial health and future prospects.

The company plans to fund the repurchase using approximately $260.0 million of its existing cash on hand and borrowings under its available credit facilities for the remaining amount. This indicates a use of both internal cash and external debt.

Quest Diagnostics is facilitating the public offering by SB Holdings Capital, Inc. under the company's existing shelf registration statement. Quest Diagnostics is not selling any shares in this offering and will not receive any proceeds from it. The company is responsible for the expenses of the offering, except for the underwriting discounts and commissions, which are borne by the Selling Stockholder.

The Selling Stockholder, SB Holdings Capital, Inc., is identified as an affiliate of GlaxoSmithKline plc. This suggests a historical or ongoing relationship where GlaxoSmithKline may have held a significant stake in Quest Diagnostics.