HLTH Corp. and WebMD Health Corp. are trying again with a merger plan that will leave the health Web portal the surviving company.
The companies said they have entered into a definitive merger agreement through which HLTH will be folded into WebMD. The tax-free, all-stock transaction will allow HLTH stockholders to receive a direct ownership in the new company, according to a news release. WebMD is taking on about $515 million in long-term debt now carried by HLTH as a result of the merger. The deal is expected to close in the third or fourth quarter of 2009, pending regulatory approval.
Under terms of the agreement, WebMDs current stock structure of class A and class B stock will be eliminated. The class B stock, of which HLTH now owns 48.1 million shares, or 80% of WebMDs equity, will be retired in favor of the class A stock. HLTH is giving up that majority interest, and each outstanding share of HLTH common stocka total of 102.8 million shareswill be converted into 0.4444 shares of WebMD class A stock. Current outstanding shares of WebMDs class A stock will be unchanged in the conversion process, according to the companies.
HLTH tried to fold itself into WebMD last February in a combined cash and stock deal, but it fell through in October. The companies cited the downturn in the economy and a desire to keep WebMD unsaddled by debt as reasons for the failed attempt. Under that agreement, HLTH stockholders would have received 0.1979 shares of WebMD stock and $6.89 in cash for each of their shares. HLTH also had to sell both its ViPS and Porex businesses as a contingent for that deal to occur. The company is still trying to shed the Porex business.
The timing for the merger is better now and in the best interest of shareholders, according to the companies. Completion of this merger will significantly increase the liquidity of WebMD shares. With a strong balance sheet and a simplified corporate structure, WebMD will be well-positioned to deliver strong growth in the years ahead, said Martin Wygod, chairman of WebMD and acting CEO and chairman of HLTH, in a written statement.
HLTH on Thursday morning was trading up slightly at $12.63 on the Nasdaq exchange.