KKR Bets on Digital Future for Health in $2.8 Billion WebMD Deal

(Bloomberg) -- KKR & Co. agreed to buy WebMD Health Corp. for about $2.8 billion as the private equity firm bets on a digital future for health care.

Acquiring the online health information provider will help KKR grow its Internet Brands business, which owns other health-care sites as well as legal, auto and travel brands, according to the buyout firm’s co-head of technology, Herald Chen.

“We think health care is extremely early in its use of digital media, internet and mobile technologies to deliver greater information and insight,” Chen said in a telephone interview.

KKR bought Internet Brands in 2014 and has bolstered the media and software company with acquisitions, including deals last year for Fodor’s Travel Publications Inc. and Auto Credit Express. The WebMD purchase is the largest deal in Internet Brands’s history, according to data compiled by Bloomberg.

Originally focused on advertising sales, Internet Brands also brings in revenue from software subscriptions and marketing services, Chen said, adding that WebMD was a good fit in those categories.

“We want to build out the verticals both organically and through acquisitions, and we think there’s a global footprint for a lot of what we do,” he said.

Earlier Speculation

Stockholders of WebMD will receive $66.50 a share in cash, according to a statement Monday. The price is 20 percent more than Friday’s closing level and 29 percent higher than where the shares traded in mid-February, when New York-based WebMD hired JPMorgan Chase & Co. to review strategic alternatives.

The sale caps months of speculation about whether WebMD, which went public 12 years ago and is now used by 75 million consumers each month, would find a buyer. In 2012, when the stock was trading near all-time lows, a sale attempt had fallen apart.

KKR’s portfolio of health-related firms is expanding: Also on Monday, the private equity firm agreed to acquire a majority stake in nutritional supplements maker Nature’s Bounty Co. Its other health-care investments include Air Medical Group Holdings and Arbor Pharmaceuticals LLC.

WebMD’s price has been volatile since the 2005 IPO, and KKR is paying just under the all-time high of $66.98 in May 2016. The stock had slumped in the second part of last year, though, and was trading under $50 at the end of January. In March, activist investor Blue Harbour Group raised its stake in WebMD to 8.99 percent and disclosed talks with the company. The group’s founder and chief executive officer, Cliff Robbins, said at the time that WebMD was underpriced and was likely to appeal to multiple buyers.

“WebMD has a unique position at the convergence of two megatrends, digital commerce and health and wellness, and has two industry leading businesses in Medscape and WebMD,” David Silverman, a managing director of Blue Harbour Group, said in a statement. “We congratulate WebMD’s board of directors for conducting a thorough strategic review process and reaching this transaction with a great partner for them in KKR.”

WebMD’s shares closed up 20 percent to $66.10 in New York, the highest since May 2016.

--With assistance from Leslie Patton and Scott Deveau

To contact the reporters on this story: Justin Mattingly in New York at jmattingly2@bloomberg.net, Melissa Mittelman in New York at mmittelman@bloomberg.net.

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, John Lauerman, Timothy Annett