Amazon.com Inc. and One Medical agreed to a $3.49 billion deal on Thursday, expanding the e-commerce giant’s virtual healthcare and introducing brick-and-mortar medical facilities for the first time.
The all-cash transaction would bring together two relatively modest players as Amazon continues its years-long march into American healthcare in an effort to expand more quickly.
Prior to making its services available to other businesses under the Amazon Care brand, the online retailer launched virtual care visits for its own employees in Seattle in 2019. Additionally, it acquired PillPack in 2018, which served as the foundation for a later-launched website that compared prices and delivered prescriptions.
Neil Lindsay, senior vice president of Amazon Health Services, stated that he believes that healthcare is at the top of the list of experiences that require innovation.
The Seattle-based retailer has made it clear that it wants to enhance and expedite treatment. A breakthrough concept like how Amazon automated the role of cashiers in supermarkets has not yet materialized.
According to its website and most recent financial statements, One Medical is a loss-making business with 767,000 members and enterprise clients like Airbnb Inc. and Alphabet Inc’s Google, which provide its services as a perk to employees.
Contrarily, larger rival Teladoc Health Inc. generates twice as much revenue every quarter as One Medical and more than 54 million paying members in the United States. Shares of Teladoc, as well as drugstore retailers CVS Health Corp and Walgreens Boots Alliance Inc., fell between 0.3 percent and 1.8 percent in response to the Amazon transaction.
According to Citi analyst Daniel Grosslight, the acquisition makes sense since the “blending of virtual and in-person treatment is essential to both One Medical and Amazon Care’s strategy.”
SCRUTINY OF DEAL EXPECTED
On Thursday, U.S. Senator Amy Klobuchar, who also serves as the chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, urged the Federal Trade Commission (FTC) to look into Amazon’s proposed merger because she was concerned about how it might affect individuals’ personal health information.
The Senator continued, “Amazon has a history of engaging in business practices that raise serious anticompetitive concerns, such as requiring small businesses on its site to purchase its logistics services as a condition of preferred platform placement, using small businesses’ non-public data to compete against them.
Recently, Amazon Care expanded the availability of its virtual care to the entire country and included the option for house calls in cities like Dallas, Los Angeles, and Washington. Demand was boosted by the COVID-19 epidemic as Amazon Care began gaining customers, including Hilton Worldwide Holdings Inc.
One Medical, established in 2007, currently provides 188 medical offices to Amazon, according to a recent financial report.
According to people familiar with the situation, Carlyle Group Inc., which had paid $350 million for a minority share in One Medical in 2018, will sell its holding as part of Amazon’s acquisition.
One Medical shareholder will receive $18 per share from Amazon, a premium of 76.8% over the company’s most recent close. Shares of One Medical were trading for $17.12.
The total acquisition value, including One Medical’s net debt, is $3.9 billion.
Analysts stated that although concerns still exist, Amazon’s minimal healthcare footprint could reduce antitrust issues.
According to Grosslight, “the DOJ (the U.S. Department of Justice) has been very aggressive in rejecting mergers recently,” and Amazon “does seem to have a bullseye on its back.”
That will undoubtedly make this acquisition the subject of closer examination than usual.
