HLTH Corp. and WebMD Cancel Merger Agreement, Citing Market Turmoil
This story was written by David Kaplan.
The wildly fluctuating financial markets have doomed a long-planned merger between HLTH Corp. and its majority-owned subsidiary, WebMD. HLTH said the companies' boards, which both agreed to the termination, felt both sides would benefit from WebMD remaining as a publicly-traded unit, citing its approximately $340 million in cash and investments and no long-term debt as evidence of a strong balance sheet. Given the particular struggles in the credit market these days, WebMD's growth would have been constrained by HLTH's $650 million in long-term debt that would be coming due in 18 to 36 months. HLTH owns approximately 84 percent of WebMD (NSDQ: WBMD). Separately, HLTH said it was buying back 50 million shares of its common stock at a price per share of $9.20.
The merger between HLTH and WebMD had ran into problems in February, when the two cited a "negotiation stalemate." A week later, the parties said they had untangled their differences and the merger was back on. The plan called for each HLTH share to convert into .1979 shares of WebMD and $6.89 in cash, representing a 26 percent premium for HLTH shareholders. Under that plan, current HLTH shareholders would hold 80 percent of the combined company, and the dual-class structure for WebMD would have been eliminated. Earlier this month, Steve Case's Revolution Health Network announced plans to merge with Waterfront Media in a deal the parties valued at $300 million, creating a company better positioned to challenge WebMD's top spot in the category.Release
By David Kaplan