NEW YORK (CNNfn) - Online medical firm Healtheon Corp. has agreed to merge with privately held WebMD Inc. in a deal worth a reported $5.5 billion, a Healtheon board member confirmed to CNNfn on Wednesday.
The deal would be a 50-50 merger of equals, Healtheon Corp. (HLTH) board member Ron Kramlich said.
The plan still must be approved by WebMD's board, which also was meeting Wednesday,
The merger would create a consolidated Web-based medical services company that provides health care information to consumers and doctors. Several high-tech heavyweights, including Microsoft Corp. (MSFT), Excite Inc. (XCIT) and Intel Corp. (INTC) plan to take stakes in the new venture, according to the Reuters news agency. Their collective investment is estimated at $500 million.
Healtheon's stock soared Wednesday amid speculation about the merger, which the Wall Street Journal valued at roughly $5.5 billion. Shares in the Santa Clara, Calif.-based company were up 16-1/8 at 72 on the Nasdaq exchange at one point, a new 52-week high. The stock was trading at 71-7/16 at mid-afternoon.
Closely held WebMD isn't publicly listed. The Atlanta-based company, which calls itself a "healthcare portal," has a partnership to provide content to CNN.com and CNN has a minority stake in WebMD.
Performance of Healtheon's stock
since its February IPO
Neither Healtheon nor WebMD, both fledgling startups, have yet turned a profit. The interest of big-time technology players in the merger reflects the demand they see in the budding online medical information business, analysts said.
"Certainly if you look at the list in partners ... you're looking at some pretty prominent names there," said Mark Cavallone, Internet analyst at S&P Equity Group. "They sense that there's demand for this kind of information over the Internet."
Healtheon was founded in 1996. Its chairman and co-founder is Jim Clark, one of the co-founders of Netscape Communications Corp. (NSCP) and Silicon Graphics (SGI).
Neither Microsoft nor Excite would comment on the reported deal. Intel officials did not return a call from CNNfn requesting comment.
Microsoft's stake is expected to be valued at around $200 million, while Excite plans to invest $20 million to $30 million in WebMD, according to the Journal. As part of the deal, WebMD likely will purchase $60 million in advertising from Excite, the Journal said.
Intel will take what the newspaper termed "a relatively minor" stake in order to ensure it's not left out in the cold by some of its fiercest rivals.
After the deal, WebMD will become the exclusive provider of online health-care content to Excite, Microsoft's MSN and Lycos, the newspaper said.
Another strategic partner will be McKesson HBOC Inc. (MCK), Reuters reported. The drug company already has an investment in WebMD. UnitedHealth Group, a health maintenance organization based in Minneapolis that already holds a stake in Healtheon, is also said to be considering an investment in WebMD.
Healtheon, which went public in February, posted a loss of $18.6 million, or 30 cents per share, in the first quarter of 1999. It is expected to lose 22 cents per share in the second quarter, according to the consensus estimate of analysts polled by First Call.
WebMD, founded by 29-year-old CEO Jeffrey Arnold, lost $7.8 million on revenue of $75,000 for the first nine months of 1998, the Journal reported. The company filed for an initial public offering in January, but withdrew its filing earlier this month.