Diagnostics firm Laboratory Corp of America Holdings is paying $6.1 billion to acquire contract research organisation Covance.

LabCorp is paying $105.12 per share, a 32% premium on Covance’s closing price on October 31, and the latter’s shareholders will pocket $75.76 in cash and 0.2686 LabCorp shares, giving them 15.5% of the combined company. Covance stock leapt 25% to $100.28 following the announcement.

The firms said that the combination “will create the world’s leading healthcare diagnostics company, capitalising on LabCorp’s industry leadership in medical testing and Covance’s leadership in contract research”.

Revenue of the combined companies, which was about $8.4 billion for the year ended September 204, will be derived from managed care (32%), pharmaceutical and biotech companies (29%), commercial customers (22%), Medicare/Medicaid (12%) and private patients (5%). It will have “established relationships” with all of the top 20 pharma companies “and an attractive payor mix”.