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Healtheon/WebMD buys Medical Manager

The company agrees to buy Medical Manager and its subsidiary CareInsite in a stock deal valued at roughly $5 billion.

Healtheon/WebMD today said it has agreed to buy Medical Manager and its subsidiary CareInsite, an Internet-based health care network for physicians, suppliers and patients, in a stock deal valued at roughly $5 billion.

Healtheon/WebMD, which links physicians and consumers to the health care industry online, said the combined services will improve the physician-patient relationship by adding a number of Internet-based health care management services to its online network, such as scheduling appointments, requesting prescription refills and eventually managing consumers' personal health records.

The deal sent shares of each company for a wild ride. In afternoon trading, shares of Medical Manager soared $22.69, or 35 percent, to $87.69. CareInsite jumped $4.63, or 7 percent, to $72.50. Healtheon/WebMD's stock also got a boost from the news, rising $2.88, or about 5 percent, to $57.88.

Under the terms of the deal, Healtheon/WebMD said it will pay 1.65 shares of Healtheon/WebMD common stock for each share of Medical Manager and 1.3 shares for each share of CareInsite not already owned by Medical Manager. Healtheon/WebMD said it plans to issue 95 million shares to the companies--64 million shares to the primary shareholders of Elmwood Park, N.J.-based Medical Manager and 31 million shares to CareInsite shareholders. Based on Healtheon/WebMD's closing price on Friday of $55 per share, the stock transaction is worth $5.2 billion.

This marks Atlanta-based Healtheon/WebMD's latest acquisition in a string of buys within the last month. In January, Healtheon/WebMD paid $2.5 billion for Quintiles Transnational's claims-processing business, an online processor of health insurance claims. Also last month, Healtheon/WebMD announced its acquisition of Kinetra, a joint venture of services giant Electronic Data Systems and drugmaker Eli Lilly. Healtheon/WebMD said it agreed to buy Kinetra for $300 million to expand the electronic transactions it processes for doctors.

With the combined services of today's proposed deal, Healtheon/WebMD said patients will be able to communicate directly with their health plan providers to obtain referrals and check benefits, co-pay levels, and status of claims and deductibles.

Healtheon/WebMD's Jeff Arnold will remain CEO, and Mike Long will remain chief operating officer and become co-chairman. Medical Manager and CareInsite chairman Martin Wygod will become co-chairman of the combined company, and Michael Singer will remain chief executive of Medical Manager Health Systems, the companies said in a statement.

Completion of the acquisitions is expected midyear and is subject to regulatory and shareholder approvals.