More PR Joey
Healtheon, WebMD Sign Merger Pact
By Andrea Orr
PALO ALTO, Calif. (Reuters) - Healtheon Corp. (Nasdaq:HLTH - news), the pioneer in Internet-based
health data, said Thursday it would acquire the online medical resource WebMD in a $10 billion deal it expects will create the
largest online health service.
The combination, which joins two more young and not-yet-profitable online companies, is among the biggest Internet mergers to date, valued at more
than $10 billion and rising as Healtheon shares soar following news of the deal.
Healtheon stock was up $27.375, about 34 percent, at $107.625 in afternoon trading on Nasdaq after gaining $24.375 Wednesday. At Wednesday's
closing price of $80.25, the deal was worth about $7.9 billion.
Physicians and the health care industry in general have been slow make use of the Internet, but Santa Clara, Calif.-based Healtheon said it was hard to
underestimate the cost savings, profit and all-around improved service that can be achieved by streamlining vast quantities of medical data.
It says health care is arguably the biggest industry in the United States, with over $1.2 trillion spent annually, and some $250 billion is wasted in
''duplicative and paper-based processes.''
''We're merging two pioneering companies to create the clear leader in Internet health services, with the ultimate goal of enabling a better, more
efficient health care system,'' Healtheon Chief Executive Michael Long said in a telephone conference call.
Healtheon, which has been working for the past three years on linking doctors, patients and insurers over the Internet, said teaming up with
Atlanta-based WebMD would significantly boost its visibility with doctors and the general public.
WebMD has minimal revenues but has something that is considered far more valuable in Internet speak -- viewers. The company operates Internet
portals offering medical content and discussion forums, providing a way for the combined Healtheon/WebMD to reach thousands of doctors and
millions of patients.
''The reality of building a business on the Internet today is that a strong brand drives traffic,'' said Healtheon founder Jim Clark, who also was a
founder of Netscape Communications Corp. and Silicon Graphics Inc. (NYSE:SGI - news) ''We need portals and WebMD has those portals.''
In an effort to achieve the broadest possible visibility for WebMD, the company has aligned with a number of companies like Microsoft Corp.
(Nasdaq:MSFT - news) and Excite Inc. (Nasdaq:XCIT - news) to integrate its content onto their popular Web sites.
Microsoft has made a $250 million equity investment in WebMD and will underwrite $150 million in physician subscription commitments as a way of
getting doctors quickly connected to the service, by essentially enrolling them for free.
The deal puts longtime Microsoft foe Clark on the same team as the software giant. While at Netscape, Clark became entangled in the Internet
browser wars with Microsoft.
''My feeling about it is that the business is really dynamic and this is the best thing for everyone and for our shareholders,'' said Clark. ''I've been on
the other side of the fence and I've decided to work on this side.''
Healtheon said aligning with Microsoft would help it bring more technology standards to the online healthcare industry. ''The opportunity to create a
broad standard is unique, and necessary,'' said Long.
Over time, the company is expected to pursue electronic commerce opportunities such as prescription drug sales.
Although neither Healtheon nor WebMD is involved in online commerce, they are merging at a time when several Internet pharmacies like
drugstore.com and PlanetRx are appearing, and analysts say they would be poised to acquire or align with one of these companies.
Under terms of the deal, shareholders of WebMD, a privately held company, will get 1.815 Healtheon shares for each WebMD share.
WebMD had been planning an initial public offering, but that filing was withdrawn last week.
Long, chief executive officer of Healtheon, will be chairman and chief operating officer of the combined companies. Jeff Arnold, CEO of WebMD, will
become CEO of Healtheon/WebMD.
Earlier Stories
Healtheon, WebMD Ink Merger Pact (May 20)
Healtheon Says In Merger Talks With WebMD (May 19 |
