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Signs of Times: Healtheon Pulls WebMD Merger off Table

by John Moore | October 20, 2008

Back in February of this year, Healtheon and WebMD announced that they would merge.  At the time, our analysis was that the new combined entity would become more attractive for as an acquisition target.

Well, that is not longer the case as this morning, Healtheon and WebMD made a joint announcement that the merger has been called off.

Quoting from the press release:

Martin J. Wygod, Chairman of the Board of HLTH and of WebMD, commented: “The Boards of Directors of HLTH and WebMD believe that, in the current economic environment, it is important for a growth company like WebMD not to be encumbered by $650 million in long-term debt that would be coming due in 18 to 36 months. By terminating their merger, HLTH and WebMD will retain financial flexibility and be in an advantageous position to pursue potential acquisition opportunities expected to be available to companies with significant cash resources in this period of financial market uncertainty.”

The Boards also took into consideration the fact that the sale of Porex has been delayed as a result of one of the leading potential buyers having difficulty arranging financing for a purchase because of conditions in the credit markets. HLTH is continuing its sales process for Porex with other potential buyers, but cannot provide assurance as to the timing or terms for a transaction.

In light of current economic turmoil and tight credit market, this appears to be a wise move.  Also, with nearly $340M in cash and investments on-hand, WebMD can now be on the prowl to pick-up a company or two at bargain prices as many will be on the ropes.

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