Troubled financial markets halt merger of HLTH, WebMD; HLTH to buy back stock

By Lisa Kerner

Charlotte, N.C., Oct. 20 - HLTH Corp. and its 84% owned subsidiary, WebMD Health Corp., mutually terminated their merger agreement, blaming recent turmoil in the financial markets.

It was reported in February 2008 that HLTH would merge into WebMD. Under the companies' merger agreement, each outstanding share of HLTH common stock would have been converted into 0.1979 shares of WebMD common stock plus $6.89 in cash.

The merger would have eliminated the controlling class of WebMD stock held by HLTH and WebMD's existing dual-class stock structure, a prior news release said.

The boards of directors of both companies believe HLTH and WebMD stockholders would benefit from WebMD continuing as a publicly traded subsidiary, a joint news release said Monday.

WebMD has a strong balance sheet, including approximately $340 million in cash and investments and no long-term debt, according to the release.

"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," chairman of the boards of HLTH and WebMD Martin J. Wygod said in the release.

In addition, WebMD will not be "encumbered by $650 million in long-term debt that would be coming due in 18 to 36 months," Wygod said.

HLTH stock repurchase

HLTH also announced it will begin a tender offer next week to purchase up to 50 million shares, or approximately 27%, of its common stock for $9.20 per share.

The company's stock closed at $9.10 (Nasdaq: HLTH) on Friday.

HLTH said the offer is conditioned on a minimum of 25 million shares being properly tendered and not withdrawn in the offer.

The company will used a portion of its $1.3 billion in cash and investments to fund the tender offer.

HLTH, formerly Emdeon Corp., is a health-care business, technology and information services company based in Elmwood Park, N.J.

New York-based WebMD provides health information services through its online portals and publications.

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