Teladoc to take over Livongo in $18.5B digital health deal

Telehealth giant Teladoc has moved to absorb the digital disease management company Livongo through a deal worth as much as $18.5 billion, reflecting the growing importance of virtual healthcare platforms as the world is caught in the wake of the COVID-19 pandemic.

The massive medtech acquisition takes the crown not two days after Siemens Healthineers announced a $16.4 billion offer for the cancer radiotherapy player Varian Medical Systems.

Livongo, a 2017 Fierce 15 winner, began life as a startup with plans to build a cloud-based diabetes management program, linking a person’s glucose meter to personalized coaching to help control their blood sugar. Since then it has expanded to cover high blood pressure and behavioral health, before going public with a $355 million IPO last year.

Under the new agreement, every Livongo share will be exchanged for 0.592 shares of Teladoc, plus $11.33 in cash for each. The resulting company—carrying the name Teladoc Health, and run from its headquarters in Purchase, N.Y.—will be split with Teladoc shareholders owning about 58% and Livongo shareholders bearing the remaining 42%.

“This merger firmly establishes Teladoc Health at the forefront of the next-generation of healthcare,” said CEO Jason Gorevic, who will remain as chief going forward. The combined company is expected to bring in a pro forma revenue of about $1.3 billion for 2020, they estimated.

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Still, Teladoc and Livongo’s share prices fell on the news, each dropping about 15% following the announcement. However, both companies have seen strong gains over the past year, with Teladoc up at least 200% and Livongo up more than 280%. 

In its recent second quarter earnings report, Teladoc posted 85% growth in revenue, with total virtual health visits up 203% as people put off in-person trips to the clinic over coronavirus concerns. Livongo saw the same, with a 125% boost in sales plus 113% growth in enrolled members.

“By expanding the reach of Livongo’s pioneering Applied Health Signals platform and building on Teladoc Health’s end-to-end virtual care platform, we’ll empower more people to live better and healthier lives,” said Glen Tullman, Livongo’s founder and executive chairman. 

“This transaction recognizes Livongo’s significant progress and will enable Livongo shareholders to benefit from long-term upside as the combined company is positioned to serve an even larger addressable market with a truly unmatched offering,” Tullman added.

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By linking Teladoc’s services—broadly integrated across the healthcare system, and reaching 70 million customers—with Livongo’s focus on preventive medicine and chronic disease management, the two companies hope to provide personalized and actionable recommendations to help improve users’ health outcomes on a wide scale, including in underserved populations. 

The two also estimate seeing revenue synergies of $100 million after two years, and $500 million by 2025—including from cross-marketing each other’s services, and pulling Livongo up through Teladoc’s international commercial base. Cost synergies, meanwhile, are expected to top $60 million, with the deal slated to close by the end of this year.