Teladoc Health on Wednesday announced plans to merge with Livongo, a digital health company that helps users manage chronic conditions.
The newly combined company will operate under the name Teladoc Health, and maintain Teladoc’s headquarters in Purchase, N.Y.
Under a definitive merger agreement, each Livongo share will be exchanged for 0.5920 times a share of Teladoc and $11.33 in cash. That adds up to an estimated value of $18.5 billion, according to the companies. Once the merger closes, Teladoc shareholders will own 58% of the combined company; Livongo shareholders will own 42%.
The agreement has been approved by the board of directors at both companies.
Teladoc’s CEO Jason Gorevic will lead the combined company and keep his role as CEO.
Teladoc’s chairman, David Snow, will lead the new company’s board of directors. The new board of directors will comprise eight members of Teladoc’s current board and five members of Livongo’s current board, including Glen Tullman, Livongo’s founder and current executive chairman.
“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,” said Tullman, who previously served as CEO of Allscripts Healthcare Solutions, in a statement.
The announcement did not specify whether Livongo CEO Zane Burke, former Cerner Corp. president, would have a role at the combined company.
Teladoc and Livongo expect the transaction to close by year-end.
The companies expect to see 2020 combined revenue of an estimated $1.3 billion and cover 70 million members, according to a presentation shared with investors on Wednesday.
With the combined company, Teladoc and Livongo officials expect to cross-sell their products among their respective customer bases.
Teladoc physicians will also be able to refer relevant patients to Livongo’s chronic condition management programs for diabetes, pre-diabetes, hypertension and behavioral health.
The merger builds on Teladoc’s push to create an integrated acute and specialty virtual-care service that spans provider-to-provider telemedicine capabilities for inpatient care, as well as consumer-to-provider applications for outside the hospital. In July, Teladoc acquired InTouch Health, a telemedicine company that serves the provider market, as part of that vision.
“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,” Gorevic said in a statement.
Teladoc last week posted $241 million in revenue for this year’s second quarter, up 85% year-over-year as telemedicine use soared amid the COVID-19 pandemic, with visits hitting 2.8 million, up 203.4% from 908,000 in 2019’s second quarter. The company also reported a sizeable net loss of $25.7 million, compared to net loss of $29.3 million in the year-ago quarter.
Livongo, which went public in July of last year, reported $91.9 million in revenue for the second quarter, up 124.7%, and 1,328 clients, up 75.2%. Livongo works with health systems, health plans and employers as clients, which subsequently cover costs of program participation for individual members.