Healtheon/WebMD to purchase rival in Internet health field

CareInsite and parent to boost doctor network

Health care

February 15, 2000|By BLOOMBERG NEWS

SANTA CLARA, Calif. -- Healtheon/WebMD Corp., the biggest Internet company linking doctors, patients and insurers, said yesterday that it has agreed to buy rival CareInsite Inc. and its parent Medical Manager Corp. for about $5.4 billion in stock.

Holders of Medical Manager will get 1.65 shares of Healtheon, or $90.75, a premium of 40 percent based on Friday closing prices. Medical Manager owns 69 percent of CareInsite, whose other shareholders get 1.3 Healtheon shares, or $71.50, a 5 percent premium.

The acquisition eliminates Healtheon's largest rival in providing doctors with online links to check insurance coverage, process claims, buy supplies, read new medical studies and access lab reports. Adding Medical Manager, the largest maker of software used to run doctors' offices, links the combined company to about 455,000 physicians.

"There's now one 800-pound gorilla in this space, and that's Healtheon," said Bill McKeever, a PaineWebber analyst with a "buy" rating on Healtheon.

Shares of Healtheon, founded by Internet pioneer Jim Clark, have more than doubled since the company's stock was listed a year ago. Healtheon rose $1.625 to close at $56.625 in Nasdaq stock market trading of 8.7 million shares, twice the three-month average.

Medical Manager shares rose $21.75, or 33 percent, to $86.75. CareInsite shares rose $4.125, or 6 percent, to $72.

Healtheon changed its name to Healtheon/WebMD after a four-way merger in November.

The combined company will have access to about 80 percent of U.S. doctors, including 90 percent of those who write the most prescriptions, said James Kumpel, a Raymond James Financial Corp. analyst with a "buy" rating on Healtheon.

Although there are about 20,000 Internet sites providing information to doctors and consumers, the Healtheon-CareInsite combination could bring scrutiny from the U.S. Federal Trade Commission because it involves such a large portion of doctors.

"I would imagine there would be extensive regulatory review," Kumpel said.

Healtheon's chief executive, Jeff Arnold, said he didn't anticipate antitrust hurdles holding up the purchase, which should close sometime in the middle of the year.

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