virtual health care
Teladoc and Livongo agree to $18.5bn deal, but investors don’t like the terms
Shareholders question the motivation for such a significant price tag for Livongo
New York/Paris — Teladoc Health, a US supplier of virtual health care, agreed to buy Livongo Health, which helps manage diabetes with connected devices, for about $18.5bn, as the novel coronavirus pandemic spurs demand for remote medicine.
Each Livongo share will be exchanged for 0.5920 shares of Teladoc and $11.33 in cash, the companies said in a statement. At $159 per share, the price is 10% above Livongo’s close on Tuesday. Both boards backed the transaction, in which Teladoc holders will own 58% of the enlarged company.
However, investors appeared to take a cautious view of the proposed terms. Livongo shares were down 8.5% at $132.27 at 9.45am on Wednesday in New York, while Teladoc shares fell 15%.
Teladoc investors are viewing the transaction with “major scepticism”, wrote Jared Holz, a Jefferies healthcare trading specialist, in a note to clients.
Shareholders question the motivation for such a significant price tag for Livongo, according to Holz, when the stock has been performing well and when “barriers to entry here do not seem overly significant”.
Livongo went public a year ago with a market value of about $3.4bn, and the stock has more than quadrupled since that time. Its gains had been especially steep in the past month, roughly doubling since the start of July to the close on Tuesday.
Teladoc is best-known for providing urgent-care services. Acquiring Livongo, whose products monitor the vital signs of people with conditions such as diabetes, will help it branch out into the management of chronic diseases. Livongo’s devices alert doctors when glucose or other readings are out of range. It also offers coaching to help patients manage their conditions.
Once viewed primarily as a way to help rural populations better access care, companies such as Teladoc have long bet that much healthcare would eventually move online. A new wave of upstarts, flush with Silicon Valley funding, have already helped increase interest in virtual care, and with lockdowns and fears of contagion keeping many people away from the doctor’s office, the pandemic has hastened wider adoption of such services.
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