Activist Investor Jana Partners Builds New Stake in Labcorp

(Bloomberg) -- Jana Partners has built a new position in Laboratory Corp. of America Holdings, the latest investment in the health-care space for the activist investor.

The New York-based hedge fund said in a regulatory filing Tuesday it owned a stake in the clinical laboratory company valued at about $192 million. Labcorp was Jana’s fourth-largest investment at the end of December, according to data compiled by Bloomberg.

It is unclear whether Jana will seek changes at the company, and a representative for the firm declined to comment.A representative for Labcorp wasn’t immediately available for comment.

Labcorp’s shares have climbed nearly 24% over the past year, giving the company a market value of $23 billion.

The arrival by an activist at Labcorp may prompt the company to launch a strategic review to potentially sell or spin off its Covance clinical research business, said Brian Tanquilut, an analyst with Jefferies Financial Group Inc., in a note to clients Wednesday.

Investor frustration has been high because the stock continues to trade at a steep discount with no credit being given for owning its higher-growth clinical research assets, he said. Tanquilut estimates Labcorp’s Covance business alone could be worth $285 a share, or 21% higher than where Labcorp trades, based on the multiples that similar businesses trade at. That suggests there is the potential for meaningful value creation in a sale or spin, he said.

Jana has a history of investing in the health-care space, disclosing a stake late last year in Encompass Health Corp. Encompass subsequently announced it was exploring strategic alternatives for its home health and hospice business, including a potential sale or spinoff of the business.

Jana also ran a proxy contest at Team Health Holdings Inc. in 2016, which resulted in a settlement that saw two of its representatives join the board. Blackstone Group Inc. later agreed to acquire Team Health later that year in a deal valued at $3.2 billion.

In addition to Labcorp, Jana disclosed new positions in W.R. Grace & Co. and Tegna Inc., which currently faces a second proxy fight with one of its investors, Standard General. It exited its stake in Callaway Golf Co. and Brink’s Co. during the fourth quarter as well.

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