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Quest buys Humana's lab business, inks testing deal

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Quest CEO Steve Rusckowski

Quest Diagnostics ($DGX) is on a buying spree to grow its testing business, and now the company has signed a deal to buy the toxicology and clinical laboratory segment of health insurance giant Humana ($HUM).

Neither company is disclosing the price tag, but the deal gives Quest the Advanced Toxicology Network, a division of Humana subsidiary Concentra. Coupled with the acquisition is a long-term commitment by Quest to provide workplace drug toxicology and clinical laboratory testing for Concentra.

Quest plans to roll Concentra's labs into its national network by the end of the year, and the company expects the deal to modestly increase profits by 2014.

The acquisition is Quest's third this year, all focused on expanding its testing capacity and lab holdings around the country. In April, the diagnostics giant signed a deal to acquire Dignity Health's lab-related clinical outreach operations, and in January the company bought the UMass Memorial Medical Center's clinical and anatomic-pathology lab business.

CEO Steve Rusckowski has been guiding the slumping company through its "Invigorate" plan over the past year, designed to improve margins through reorganization, changes in managerial structure and the sale of its HemoCue Business for $300 million. The year's brisk M&A pace plays a role in that, too, as Quest focuses on high-growth areas like drug screening and clinical outreach to dull the blow of cuts in Medicare coverage.

"With this transaction, Concentra's patients, physicians and employer clients will gain access to Quest's industry-leading menu of innovative workplace drug and clinical lab diagnostic information services," Rusckowski said in a statement. "The transaction is also consistent with Quest's disciplined capital deployment strategy, which includes generating 1% to 2% in growth per year through strategically aligned fold-in acquisitions."

After a fairly soft first quarter, Quest scaled down its full-year projections from 1% growth to just about equaling 2012's revenue. But Quest has hardly been shy about pulling the trigger on acquisitions, and Rusckowski has said the company will keep an eye out all year for accretive deals.

- read the announcement

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