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.
"We're confident that this merger is the right decision for the future of Livongo and our many different stakeholders, as it recognizes Livongo's significant progress and future growth trajectory," Tullman said on a call with investment analysts Wednesday. Tullman previously served as CEO of Allscripts Healthcare Solutions.
The announcement did not specify whether Livongo CEO Zane Burke, former Cerner Corp. president, would have a role at the combined company.
The companies will update the new management structure as they work toward the merger, a Livongo spokesperson said when asked about Burke's role.
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 products among their respective customer bases.
An estimated 25% of Teladoc's and Livongo's current customers use services from both companies, Gorevic said on Wednesday's call.
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.
Teladoc's goal is to create a "complete end-to-end virtual care solution," Gorevic said.
Gorevic said that Teladoc has been interested in adding services focused on chronic condition management for years, dating back to at least when the company went public in 2015.
"This has always been part of our vision," he said. "I think it did get accelerated, substantially, by the current situation, which has thrust virtual care into the forefront and rapidly accelerated the adoption among consumers, as well as among providers."
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 sizable 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 a net loss of $1.6 million, up from nearly $13 million last year. Livongo works with 1,328 clients—including health systems, health plans and employers—which subsequently cover costs of program participation for individual members.
