One of the world’s biggest and the most known private equity firms is buying an online health publisher WebMD Health Corp. The parties announced the deal on Monday evening, stating the deal would be worth around $2.8 billion.
The financials of the deal
Private equity giant KKR will pay $66.50 per share, which is a premium of 20.5% of WebMD’s Friday closing price. The shares were trading at $66 before the opening bell yesterday.
The paying party won’t be KKR itself, but one of its subsidiaries. KKR-owned Internet Brands is behind the $2.8 billion acquisition. The publicly traded health publisher will then turn public after the deal is completed. The parties expect this to take place during the fourth quarter of the year.
WebMD CEO Steven Zatz commented the deal in a statement saying, “We believe that this transaction will provide additional flexibility and resources to deliver increased value to customers, healthcare professionals, employers, and health plan participants”.
Bringing healthcare websites together
The deal will see big healthcare websites combine their forces. WebMD’s websites include the likes of WebMD.com, Medscape.com, and MedicineNet.com. KKR-owned Internet Brands already has a range of healthcare websites in its portfolio. The subsidiary is in charge of DentalPlans.com and AllAboutCounseling.com.
WebMD launched in 1996 and it is one of the most popular health websites in the world. In 2016, the website attracted well over 70 million monthly unique visitors. The company went public in 2005. On the other side, KKR has been in control of Internet Brands since 2014. The private equity firm acquired the company for $1.1 billion.
Analysts have taken in the news of the deal well. The LA Times quoted Raymond James’ Nicholas Jansen writing, “We view the acquisition news as validation of our longstanding positive thesis of WebMD’s strategic positioning, with unrivalled reach to consumers and physicians serving an ever-important (and perhaps underutilized) platform amidst ongoing trends toward healthcare consumerism”.
Slowing advertising revenue
The deal doesn’t come as a surprise, as WebMD has openly admitted it would be looking for a potential buyer. The company confirmed in February that it is exploring different options after the demand for advertising space on its websites slowed down.
WebMD hasn’t been exploring acquisition as an option for the first time. In 2012, the health publisher considered a similar deal. At the time, the company decided against it after business magnate Carl Icahn bought a stake in the company.
According to Fortune’s reporting, a big part of the company’s advertising revenue currently comes from Medscape. The medical news and education brand accounted for 60% of its advertising revenue in 2016.
The health publisher has also been testing new technologies, such as virtual reality apps. This acquisition might boost the introduction of these technologies or bring about innovative thinking in the company. In the hotly fought fight for online advertising revenue, both companies will benefit from the deal – combining their efforts against the likes of Google and Facebook could help increase advertising revenue once more.