- Virtual care leader Teladoc Health Inc (NYSE: TDOC) and leading Applied Health Signals company Livongo Health Inc (NASDAQ: LVGO) announced that they have entered into a definitive merger agreement valued at $18.5 billion
Virtual care leader Teladoc Health Inc (NYSE: TDOC) and leading Applied Health Signals company Livongo Health Inc (NASDAQ: LVGO) announced that they have entered into a definitive merger agreement. And this merger represents a transformational opportunity to improve the delivery, access, and experience of healthcare for consumers around the world.
The complementary organizations are going to combine to create substantial value across the healthcare ecosystem, enabling clients everywhere to offer high quality, personalized, and technology-enabled longitudinal care that improves outcomes and lowers costs across the full spectrum of health.
As part 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. This represents 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 about 58% and existing Livongo shareholders will own about 42% of the combined company.
The combination of Teladoc Health and Livongo creates a global leader in consumer-centered virtual care. And the company will have expected 2020 pro forma revenue of approximately $1.3 billion, representing a year over year pro forma growth of 85%. Plus the combined company is expected to have pro forma Adjusted EBITDA of over $120 million for 2020.
By bringing together leaders in virtual health and chronic condition management, the merger combines comprehensive clinical expertise with rich technology and data-driven experience; prevention and chronic condition management with acute and specialty care; behavior change expertise with data science; global footprint with products meeting a global need; access with innovation and two of the fastest-growing companies in health technology.
And combining clinical expertise with deeper and more comprehensive consumer health insights to deliver the highest quality care and improve outcomes. The transaction combines Teladoc Health’s broad integrated services across virtual care with Livongo’s data-driven approach to providing actionable, personalized, and timely health signals to create a comprehensive virtual healthcare delivery system.
The combined company’s platform will feature the full range of health support – from AI+AI engine-driven “nudges” and health coaches to therapists and board-certified physicians and the world’s leading specialists – available anytime and anywhere to ensure the right care is always delivered.
Teladoc Health and Livongo will empower consumers to proactively manage their wellbeing with the help of a single and comprehensive partner across the full spectrum of health, whether they are at risk of, or living with, chronic conditions or need acute care. By tapping into data and care anytime or anywhere, consumers will have real-time information and guidance to stay healthy and avoid the unchecked progression of an illness.
Teladoc Health’s flywheel approach to continued member engagement combined with Livongo’s track record of using data science to build consumer trust will accelerate the combined company’s development of longitudinal consumer and provider relationships. And expanding Teladoc Health’s portfolio and footprint with Livongo’s leadership in addressing underpenetrated and underserved chronic condition populations.
Teladoc Health’s global reach — including 70 million customers in the United States, and significant access to high growth segments in that market (e.g., Medicare and Medicaid) — give Livongo a stronger platform to reach millions of new consumers, at risk of or living with chronic disease. The complementary cultures and operating philosophies that put a premium on health equity.
Teladoc Health has long focused on virtual care as the “great equalizer” expanding access to underserved communities facing negative social determinants of health. And with Livongo’s focus on chronic conditions, which disproportionately impacts underserved communities, the combined company will be positioned to make meaningful progress on addressing long-standing disparities.
The significant shareholder value creation and revenue acceleration opportunities. And the combined company is positioned to execute quantified opportunities to drive revenue synergies of $100 million by the end of the second year following the close, reaching $500 million on a run-rate basis by 2025.
These opportunities include increased cross-selling and penetration into each company’s client base. And they also include accelerating Livongo’s international expansion through Teladoc Health’s existing footprint, improving combined company member retention rates, and driving more efficient enrollment.
In addition to the quantified synergies, the combination offers significant unquantified synergies by enabling new care models and next-generation solution opportunities. As a result of efficiencies, the combined company is expected to achieve cost synergies of $60 million by the end of the second year following the close, which can be reinvested to drive topline growth and margin expansion.
Jason Gorevic, current CEO of Teladoc Health, will be the CEO of the combined company. Headed by Teladoc Health chairman, David Snow, the newly combined Teladoc Health Board of Directors will be composed of eight members of the Teladoc Health Board and five members of the Livongo Board.
The transaction is expected to close by the end of Q4 2020, subject to regulatory and Teladoc Health and Livongo shareholder approvals and other customary closing conditions. And the newly combined company will be called Teladoc Health and will be headquartered in Purchase, New York.
Lazard served as exclusive financial advisor to Teladoc Health and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal advisor. And Morgan Stanley served as exclusive financial advisor to Livongo and Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor.
KEY QUOTES:
“This merger firmly establishes Teladoc Health at the forefront of the next-generation of healthcare. 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.”
– Jason Gorevic, CEO of Teladoc Health
“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. 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.”
– Glen Tullman, Livongo Founder and Executive Chairman
