KKR to Buy WebMD in $2.8 Billion Deal
KKR's Internet Brands plans to launch a tender offer to purchase WebMD for $66.50 a share
July 24, 2017
by Matt Jarzemsky and Bowdeya Tweh
KKR & Co. has reached a deal to buy WebMD Health Corp. for $2.8 billion. The New York-based health-information provider had been running an auction after publicly putting itself in play earlier this year.
KKR's Internet Brands plans to launch a tender offer in the next 10 business days to acquire WebMD shares for $66.50 each in cash, WebMD said Monday.
The shares were trading at just over $50 when WebMD said it would consider a sale. Shares rose 18% to $65 in premarket trading Monday. The stock notched a record close of $66.98 in May 2016.
WebMD said the acquisition is expected to close during the fourth quarter of 2017.
WebMD was founded in the late 1990s by Jeffrey Arnold, who became a billionaire at age 29 when the company merged with Healtheon Corp. in 1999. In addition to its namesake website, featuring a symptom checker and glossary of medical terms, the company operates physician-focused Medscape.com, among other services.
The expected takeover comes as uncertainty surrounding health-care policy and drug pricing has damped demand for pharmaceutical marketing such as advertising on WebMD's websites. Executives noted that backdrop in February, as the company forecast slowing 2017 revenue and said it would explore a sale.
"We believe that this transaction will provide additional flexibility and resources to deliver increased value to consumers, health care professionals, employers, and health plan participants," said Dr. Steven L. Zatz, CEO of WebMD, in prepared remarks.
WebMD also said Monday it expects to report a second-quarter profit of $18.9 million, or 43 cents a share, compared with a profit of $17.8 million, or 39 cents a share, a year earlier. Revenue is expected to rise 5% to $176 million. The company's full second-quarter report is expected to be released Aug. 7.
Analysts polled by Thomson Reuters expected the company to report earnings per share of 41 cents on revenue of $171.6 million.
Private-equity firms have long seen the company as a target. In 2012, WebMD scrapped an earlier effort to sell itself, which came on the heels of billionaire investor Carl Icahn taking a stake in the company and arguing it was undervalued.
In March, activist hedge fund firm Blue Harbour Group LP disclosed an 8.99% stake in WebMD. The fund firm, founded by former KKR deal maker Clifton Robbins, is known for friendly approaches toward corporate management teams that contrasts with the style of some of its peers.