BUSINESS ACQUISITIONS

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

BUSINESS ACQUISITIONS

BUSINESS ACQUISITIONS

    On January 21, 2020, the Company completed its acquisition of Blueprint Genetics Oy ("Blueprint Genetics"), in an all cash transaction for $108 million, net of $3 million cash acquired. Blueprint Genetics is a leading specialty genetic testing company with deep expertise in gene variant interpretation based on next generation sequencing and proprietary bioinformatics. Through the acquisition, the Company acquired all of Blueprint Genetics' operations. Based on the preliminary purchase price allocation, which may be revised as additional information becomes available during the measurement period, the assets acquired and liabilities assumed primarily consist of $77 million of goodwill (none of which is tax-deductible), $43 million of intangible assets, an $11 million deferred tax liability, and $2 million of property, plant and equipment and working capital. The intangible assets primarily consist of technology and customer-related assets which are being amortized over a useful life of 10 years and 15 years, respectively.

    On April 6, 2020, the Company completed its acquisition of select assets which constitute substantially all of the operations of Memorial Hermann Diagnostic Laboratories, the outreach laboratory division of Memorial Hermann Health System ("Memorial Hermann"), in an all cash transaction for $120 million. Memorial Hermann is a not-for-profit health system in Southeast Texas. Based on the preliminary purchase price allocation, which may be revised as additional information becomes available during the measurement period, the assets acquired primarily consist of $27 million of customer-related intangible assets and $93 million of tax-deductible goodwill. The intangible assets are being amortized over a useful life of 15 years.

    On August 1, 2020, the Company completed its acquisition of the remaining 56% interest in Mid America Clinical Laboratories, LLC ("MACL") from its joint venture partners in an all cash transaction for $93 million, net of $18 million cash acquired. The final consideration is subject to post closing adjustments related to working capital. MACL is the largest independent clinical laboratory provider in Indiana. Prior to the acquisition, the Company accounted for its 44% interest in MACL as an equity method investment, which was remeasured to its fair value of $87 million on the acquisition date, resulting in a gain of $70 million that was recognized in other income, net in the consolidated statements of operations. The fair value of the previously held equity interest was determined using a discounted cash flow analysis that takes into account, among other items, MACL's expected future cash flows, long-term growth rate (1.5%), and a discount rate commensurate with economic risk (7.5%). Based on the preliminary purchase price allocation, which may be revised as additional information becomes available during the measurement period, the assets acquired and liabilities assumed consist of $84 million of goodwill (of which $47 million is tax-deductible), $74 million of intangible assets, $11 million of working capital and $11 million of property, plant and equipment. The intangible assets consist of customer-related assets which are being amortized over a useful life of 15 years. As a result of the acquisition, MACL became a wholly owned subsidiary of the Company.

    The acquisitions were accounted for under the acquisition method of accounting. As such, the assets acquired and liabilities assumed were recorded based on their estimated fair values as of the closing date. Supplemental pro forma combined financial information has not been presented as the impact of the acquisitions is not material to the Company's consolidated financial statements. The goodwill recorded primarily includes the expected synergies resulting from combining the operations of the acquired entities with those of the Company and the value associated with an assembled workforce and other intangible assets that do not qualify for separate recognition. All of the goodwill acquired in connection with these acquisitions has been allocated to the Company's DIS business. For further details regarding business segment information, see Note 13.

    For details regarding the Company's 2019 acquisitions, see Note 6 to the audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K.