Teladoc Health Inc. and Livongo Health Inc., two of the biggest names in the fast-growing telehealth market, said on Wednesday that they plan to merge in a transaction worth $18.5 billion.

The deal is expected to close by year’s end. The combined company will operate under the Teladoc name with Teladoc Chief Executive Officer Jason Gorevic at the helm.

Purchase, New York-based Teladoc provides a telehealth platform that enables patients to book virtual doctor’s appointments via a mobile app. The company’s main focus is providing care for acute conditions, but it has recently been expanding into other areas. Last quarter, it reported a 92% jump in virtual visits year-over-year as more people chose to access care remotely.

Mountain View, California-based Livongo operates a chronic care management platform for people with conditions such as diabetes. The company offers programs that provides a combination of expert coaching, health reports and devices such as connected blood glucose meters. Livongo had more than 200,000 members as of November 2019, which the company described at the time as a more than 110% increase from the prior year.

The merger will see Teladoc absorb Livongo in a cash-and-stock deal valuing the latter firm at $18.5 billion. Under the transaction terms, Teladoc is paying $11.33 per share and exchanging 0.592 of its own shares for each share of Livongo.

The $18.5 billion price tag reflects not only the rapid growth of the telehealth sector, but also the significant upsides that the companies expect to see by merging. Teladoc hopes to reduce annual costs by $60 million and achieve $100 million in “revenue synergies” within two years of closing the deal. By 2025, the company anticipates those revenue synergies will grow to $500 million on a run-rate basis.

Teladoc and Livongo expect to realize that sales uplift through a number of factors, including an anticipated improvement in member retention and the planned push to make enrollment more efficient. The combined company will also bring new services to market to expand its portfolio. 

“This transaction recognizes Livongo’s significant progress and will enable Livongo shareholders to benefit from long-term upside as the combined company is positioned to serve an even larger addressable market with a truly unmatched offering,” Livongo founder Glen Tullman said in a statement. 

The combined company is expected to generate pro forma 2020 revenues of about $1.3 billion, representing 85% year-over-year growth.

Photo: Teladoc