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WebMD Health [NASDAQ:WBMD] is asking suitors to submit final bids by mid-July, two sources briefed on the matter said.
Silver Lake is among the financial sponsors that has been pursuing the New York-based online health information service, these sources said. One of the sources said the sale process, which initially drew robust interest from private equity firms, has seen the interest dwindle.
This news service previously reported that WebMD management presentations commenced in early June. The Blackstone Group [NYSE:BX], Bain Capital, The Carlyle Group, Thoma Bravo, TPG and Vista Equity Partners along with Silver Lake were identified as sponsors eyeing WebMD. IAC [NASDAQ:IAC], a New York-based media and internet company, was also identified as a possible suitor.
Some financial sponsors have “stayed in” the process but do not appear to be doing a lot of work, one of the sources briefed said. The level of strategic interest could not be learned.
Financing packages for WebMD are expected to carry high leverage, the second source said. This news service previously reported that some banks have pitched financing over 7x EBITDA. Leverage at the start of the process was pegged in the 6x to 6.25x EBITDA range, the same report said. WebMD projects 2017 EBITDA will be between USD 233m and USD 243m.
The first source briefed said a concern for buyers has been that WebMD, which operates separate services for consumers and doctors, had put out lower revenue growth expectations in recent years. The company does enjoy a high-level of name recognition for its web portals.
WebMD’s physician business, Medscape, is the most attractive asset at the company, as reported. Around 80% of WebMD’s USD 705m in 2016 revenue comes from advertising. The physician site accounts for 60% of the advertising revenue.
Another ongoing concern in the auction is that WebMD has explored a sale multiple times in the past without success and there has been some skepticism about the company’s willingness to transact, as reported. The second source noted, though, that the auction, this time, has advanced farther than past sale attempts.
WebMD announced plans in February to explore strategic alternatives with JPMorgan and Shearman & Sterling advising.
Activist Blue Harbour Group filed a 13-D in March disclosing an almost 9% stake in WebMD and said it had held discussions with the company.
WebMD did not return request for comment. Silver Lake declined comment.
by Bhavna Kaul and Jay Antenen
As seen in the mergermarket, an Acuris company, newsletter on 10/7/17