Teladoc Health to Merge With Livongo to Improve Services
Teladoc Health, Inc. TDOC recently entered into a definitive merger agreement with Livongo Health, Inc. LVGO, which is an Applied Health Signals company. Subject to customary approval, the cash-stock transaction valued at $18.5 billion is likely to conclude by the end of fourth-quarter 2020.
Upon closure of the transaction, the existing shareholders of Teladoc Health and Livongo will own around 58% and 42%, respectively, of the combined company.
Benefits of the Deal
The merger of the companies, both of which already excel in virtual health and chronic condition management, will create a comprehensive virtual healthcare delivery system. This, in turn, will result in improved health outcomes and reduced costs across the healthcare ecosystem.
Moreover, the platform of the combined company will be equipped with AI+AI engine-driven “nudges”, health coaches, therapists, board-certified physicians and specialists. The platform will also provide consumers access to real-time information and demonstrate ways to manage their well-being.
Furthermore, the deal will not only strengthen global presence of Teladoc Health but also increase its members in the high-growth Medicare and Medicaid markets. Combining with Teladoc Health will also give Livongo access to a platform through which it will be able to reach untapped populations plagued with chronic disease.
Notably, the combined company formed as a result of Teladoc Health and Livongo is anticipated to have pro forma revenues of approximately $1.3 billion in 2020, which indicates year-over-year pro forma growth of 85%. Also, the combined company is projected to witness pro forma adjusted EBITDA of more than $120 million in this year.
The deal will certainly provide long-term benefits to the combined company as well. By the end of the second year following the deal closure, revenue synergies of $100 million are likely to be achieved, which will reach $500 million on a run rate basis by 2025. The combined company is also likely to gain from cost synergies of $60 million by the end of the second year following the completion of the merger.
Shares of this Zacks Rank #4 (Sell) healthcare provider have soared 222.3% in a year compared with the industry’s rally of 15.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Teladoc Health has been banking on several initiatives to boost telehealth offerings. It is to be noted that if there is an industry that is likely to have gained from the novel coronavirus outbreak, it is the telehealth industry. This week itself, Teladoc Health has partnered with NTCA – The Rural Broadband Association, which encompasses around 850 community-based telecommunications companies catering to the health needs of rural America.
Last month, it completed the buyout of InTouch Health, the leading provider of enterprise telehealth solutions for hospitals and health systems. Among other stocks in the medical space, Magellan Health, Inc. MGLN and Humana Inc. HUM have also developed telehealth services.
Impressive Q2 Results
Teladoc Health’s second-quarter results, which were released last week, reflected revenue surge of 85% year over year attributable to the strong performance of its revenue components, namely subscription access fees and visit fees. The quarter also witnessed solid rise in membership and patient visits.
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