Teladoc Bets Big on Online Medicine with $18.5 Billion Livongo Deal
Remote medicine company Teladoc Health Inc has agreed to acquire chronic care provider Livongo Health Inc for $18.5 billion, seeking to expand its offerings amid a boom in virtual healthcare spurred by the coronavirus pandemic.
It is by far Teladoc’s largest acquisition after a series of smaller deals turned it into the biggest dedicated U.S. provider of mobile phone and internet-based healthcare services, following its initial public offering in 2015.
In those five years, Teladoc’s market value has increased tenfold to $17 billion based on growth prospects, given that the company has yet to turn a profit.
The coronavirus pandemic has supercharged the telemedicine market. McKinsey & Co has forecast that $250 billion of spending will shift to home and office health, compared to the total $3 billion in revenue that top telemedicine companies generated before the pandemic.
Analysts said to Reuters that a combined Teladoc and Livongo would be the undisputed leader in both online acute care and management of chronic conditions, an area buoyed by President Donald Trump’s executive order on Monday to expand telehealth access to 57 million Americans. Livongo specializes in helping patients manage chronic diseases like diabetes through smart devices and consumer-friendly software.
With the deal, Teladoc said it hopes to create an integrated system through which patients can see a doctor and manage their diseases virtually.
Teladoc will use its shares to pay for most of the deal. Livongo shareholders will receive 0.5920 shares and $11.33 in cash for each of their shares, the companies said in a statement. This will leave Teladoc shareholders with about 58% of the combined company, with Livongo shareholders owning the remainder.
Shares of both companies fell on the news, as investors fretted about Teladoc overpaying and not focusing enough on profitability. This drove down the value of Livongo’s shares, because its shareholders stand to be paid mostly in Teladoc stock.
Teladoc and Livongo shares were down 17% and 10%, respectively, in afternoon trading on Wednesday.
The deal was negotiated almost entirely virtually, according to a source familiar with the discussions.
Neha writes articles on sectors including medicine, food, materials, and science & technology. A qualified statistician, she has the ability to observe and analyze the trends in global markets and write compelling articles that help CXOs in decision making. She is a bookworm and loves to read fiction, lifestyle, science and technology. Neha comes with 6 years of experience in content writing and editing that involves blog writing, preparation of study materials and OERs.