A leading services vendor in the telehealth space and a growing digital health firm announced a major acquisition on Aug. 5, at a time when telehealth and digital health are surging in adoption in U.S. healthcare. The $18.5 billion business deal, creating the merger of the Purchase, N.Y.-based Teladoc and the Mountain View, Calif.-based Livongo, will result in a “company [that] will have expected 2020 pro forma revenue of approximately $1.3 billion, representing year over year pro forma growth of 85 percent,” according to a press release posted to Teladoc’s website on Wednesday morning. “Demonstrating the power of the combined platform and the scalability of the data driven and virtual ethos, the combined company is expected to have pro forma Adjusted EBITDA of over $120 million for 2020,” the press release stated.
As Forbes’s Bruce Japsen wrote on Wednesday, “Telehealth giant Teladoc Health said Wednesday it would buy Livongo Health in a deal valuing the company at $18.5 billion as demand for virtual consultations with physicians soars during the Covid-19 pandemic. Use of online and on-demand virtual visits has soared this year as the Coronavirus strain COVID-19 triggered government orders for Americans to take shelter in their homes and prevented them from seeing medical care providers in person. That has spurred huge growth for companies in the business of virtual care, a sweet spot, which Teladoc and Livongo Health will continue to capitalize on as health insurers and government health programs weave more such services into their health benefit offerings during the pandemic and beyond. The merger brings Teledoc’s specialty in virtual healthcare together with Livongo’s expertise in the management of chronic conditions, those involved say.”
According to the Teladoc press release, “Teladoc Health (TDOC), the global leader in virtual care, and Livongo (LVGO), the leading Applied Health Signals company – today announced that they have entered into a definitive merger agreement. This merger represents a transformational opportunity to improve the delivery, access and experience of healthcare for consumers around the world. The highly complementary organizations will combine to create substantial value across the healthcare ecosystem, enabling clients everywhere to offer high quality, personalized, technology-enabled longitudinal care that improves outcomes and lowers costs across the full spectrum of health. Under the terms of the agreement, which has been unanimously approved by the Board of Directors of each company, each share of Livongo will be exchanged for 0.5920x shares of Teladoc Health plus cash consideration of $11.33 for each Livongo share, representing a value of $18.5 billion based on the closing price of Teladoc Health shares as of August 4, 2020. Upon completion of the merger, existing Teladoc Health shareholders will own approximately 58 percent and existing Livongo shareholders will own approximately 42 percent of the combined company,” the press release reported. The newly combined company will be called Teladoc Health and will be headquartered in Purchase, New York.
“This merger firmly establishes Teladoc Health at the forefront of the next-generation of healthcare,” said Jason Gorevic, CEO of Teladoc Health, in a statement included in the press release. “Livongo is a world-class innovator we deeply admire and has demonstrated success improving the lives of people living with chronic conditions. Together, we will further transform the healthcare experience from preventive care to the most complex cases, bringing ‘whole person’ health to consumers and greater value to our clients and shareholders as a result.”
“This highly strategic combination will create the leader in consumer-centered virtual care and provides a unique opportunity to further accelerate the growth of our data-driven member platform and experience,” said Glen Tullman, Livongo Founder and Executive Chairman, said in a statement also included in the press release. “By expanding the reach of Livongo’s pioneering Applied Health Signals platform and building on Teladoc Health’s end-to-end virtual care platform, we’ll empower more people to live better and healthier lives. This transaction recognizes Livongo’s significant progress and will enable Livongo shareholders to benefit from long-term upside as the combined company is positioned to serve an even larger addressable market with a truly unmatched offering.”
As Rebecca Robbins wrote in Stat News on Wednesday, “Both companies have seen their stock prices soar during the pandemic, reaching all time highs this week. Livongo’s share price is nearly six times higher than it was at the start of 2020, and Teladoc’s has tripled in that period.” She added that “While the deal is being billed as a merger, the transaction is structured as an acquisition in which Teladoc will buy out Livongo in a deal valuing the latter company at $18.5 billion. Livongo’s market capitalization had been at $14.14 billion at the end of the day on Tuesday.”
And Ari Levy of CNBC noted, also on Wednesday, that “Telehealth has been one of the massive growth stories of the Covid-19 era, as patients — particularly in older age groups — avoid clinics and hospitals where they risk exposure to the coronavirus. Teladoc is among the leaders in the space and said last week that visits in the second quarter surged 203 percent from a year earlier.”
