Healtheon/WebMd ups Medical Manager merger terms

Larry Dignan
2 min read

Amid a harsh stock slide, Healtheon/WebMD (Nasdaq: HLTH) moved Monday to save its acquisition Medical Manager Corp. and its publicly traded subsidiary CareInSite. Healtheon/WebMD will issue more shares to acquire Medical Manager and give the acquired company more management representation.

On Valentine's Day, Online health giant Healtheon/WebMD announced its engagement to Medical Manager, which provides physician practice management systems, and its subsidiary CareInSite, a services provider. At the time, Healtheon said it would offer 1.65 shares for Medical Manager. That ratio valued Medical Manager at about $90 a share, a $25 premium to its Feb. 14 price. Healtheon at the time was trading $55.

Valuations have changed (chart). Healtheon closed at 16 7/8 on Friday and Medical Manager (Nasdaq: MMGR) closed at 26 7/8. Healtheon said it will now offer 2.5 shares for each Medical Manager share. Healtheon is now paying a premium of about $14 a share for Medical Manager. The CareInSite (Nasdaq: CARI) original terms remain -- Healtheon is issuing 1.3 shares for each CareInSite share not owned by Medical Manager.

Under the new terms, Medical Manager also gets more management representation at the combined company, which will be named WebMD. Healtheon CEO Jeffrey Arnold will now share leadership with Martin J. Wygod, Chairman of Medical Manager and CareInsite. Arnold had originally planned to keep the throne to himself. Both companies will also have equal representation on the 12 member board of directors. Previously, Medical Manager had three members on the board.

The companies said they continued to support the deal and were working for a smooth transition. "Our renegotiated agreements reflect our shared commitment to complete the transactions as quickly as possible," said Arnold in a statement.

The merged company will have more than $1 billion in cash. The deal is expected to close in September, roughly three months later than previously announced.

The companies said an integration committee will be formed to integrate Medical Manager and Healtheon, as well as Healtheon's numerous acquisitions, including Envoy, acquired in May. The companies said they will develop a cost-cutting program to "be implemented as soon as possible after closing the mergers."