WebMD starts sale process, sources say
WebMD Health [NASDAQ:WBMD] recently reached out to potential suitors to invite them to participate in a sale process, three sources briefed on the matter said.
The New York-based health information provider announced in February it had hired JPMorgan and Shearman & Sterling to explore a potential sale of all or parts of the company. Subsequently, activist Blue Harbour Group filed a 13-D and said it has held discussions with the company.
WebMD is currently signing confidentiality agreements with the suitors and has not yet communicated an official process timeline, the sources said. One said initial bids should happen in the next few weeks.
A spokesperson for the company declined to comment.
A spokesperson for the company declined to comment.
Bidders may be willing to offer 12x to 13x EBITDA for WebMD, two of the sources said. With a USD 50.64 per share price, the company currently trades at 8.8x adjusted 2016 EBITDA, assuming its convertible notes are treated as debt.
The USD 398m in 2.5% notes due 2018 convert at USD 66.13, the USD 300m in 1.5% notes dues due 2020 convert at USD 52.81 and the USD 351m in 2.625% notes due 2023 convert at USD 87.07 per share.
WebMD is expected to attract financial sponsors looking to put capital to work on sizable targets, the second source said. Private equity firms may also view WedMD as a value play, the third source said.
Large companies interested in data targets like Quintiles IMS Holdings [NYSE:Q] and Hearst are potential strategic suitors, two of the sources and a sector advisor said.
Some potential private equity suitors are lukewarm about looking at the company again given its failed attempts to sell in the past, some of the sources said. WebMD reportedly considered a sale in late 2011, again in fall 2012 and briefly in early 2016.
The new strategic review comes as WebMD has been losing connections to consumers through its webmd.com website that relies on internet searches, an equity analyst said. He noted that Google has prioritized health information offered by academic institutions in search listings.
Around 80% of WebMD’s USD 705m in revenue comes from advertising from its consumer website and a separate website for physicians, Medscape. The physician site accounts for 60% of the advertising revenue. The company also markets employee wellness programs to employers and sells health data.
The employer wellness market is undergoing a shift as companies look to pass these services along to health insurers and other parties, the analyst said.
The employer wellness market is undergoing a shift as companies look to pass these services along to health insurers and other parties, the analyst said.
One of the sources briefed, however, said that while WebMD has had “its ups and downs,” the business is good and growing, especially the physicians business and that is expected to pique buyer interest.
WedMD’s share price has declined over 15% in the past year at the same time when the NASDAQ Index has rallied over 20%. The company is forecasting 1% to 4% revenue growth in 2017.
WedMD’s share price has declined over 15% in the past year at the same time when the NASDAQ Index has rallied over 20%. The company is forecasting 1% to 4% revenue growth in 2017.