Report: Healtheon, WebMD to merge

The health-care firms will join forces on the Net, sources familiar with the deal tell Bloomberg. WebMD yesterday withdrew its planned IPO.

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Online health care companies Healtheon and WebMD are planning to merge, people familiar with the deal told Bloomberg.

The news comes one day after WebMD withdrew its initial public offering.

A spokeswoman for Healtheon declined to comment on the report. Representatives of WebMD did not immediately return phone calls.

Few details were known about the deal, but sources told Bloomberg that Healtheon chairman Jim Clark would be chairman of the combined company. WebMD chief executive Jeff Arnold officer would have the same title in the combined company. Mike Long, Healtheon's current chief executive, would become the chief operating officer of the new company.

Healtheon helps facilitate health care transactions both over the Internet and via a proprietary service. WebMD offers medical information and services to physicians and consumers.

David Restrepo, a health analyst with Jupiter Communications, said the merger could make sense in that it would allow the company to present a "complete solution" to physicians. The combined company would be able to manage both the back-end and front-end of the health care process for doctors.

Restrepo said the deal also makes sense from a financial standpoint. Healtheon and WebMD are the early players in the online health market. Although WebMD is still private and has been losing money, Healtheon completed a successful public offering in February.

"Healtheon has a rich market capitalization," Restrepo said. "If there was a time to do this, the time was now, while they can afford it."

Healtheon is the second company in the last two months to be mentioned in connection with WebMD. Last month, Microsoft had offered to pay $300 million for a 27 percent stake in the company.

Microsoft spokesman Tom Pilla declined to comment on the rumors tying his company to WebMD.

WebMD had initially filed to go public in January. It planned to sell a minority stake in the company for $55 million.

Restrepo said withdrawing the IPO was probably a wise move for a company that didn't begin operating on the Web until last fall.

"Even by Internet standards, they were losing lots of money and weren't booking lots of revenues," Restrepo said.

According to its regulatory filing, WebMD lost $4.3 million on no revenue in 1997 and $7.8 million on $75,000 of revenue for the nine months ending September 30, 1998.

Healtheon lost $54 million in 1998 on $48.8 million in revenue. The company lost $28 million on $13.4 million in revenue in 1997.

Healtheon stock jumped 21 percent on the rumors, up 10 points to close at 57.

Bloomberg contributed to this report.