By Noor Zainab Hussain and Manas Mishra
(Reuters) - Teladoc Health Inc <TDOC.N> has agreed to buy chronic care provider Livongo Health Inc <LVGO.O> in a deal valuing the company at $18.5 billion (14 billion pounds), betting on a boom in online care and consultations spurred by the coronavirus crisis.
The merger is by far Teladoc's biggest investment in a campaign of smaller acquisitions since 2017 that have made it the leading U.S. provider of a range of phone and online-based healthcare services.
Analysts said the latest deal should make the combined company the undisputed leader in both online acute care and the management of chronic conditions, following President Donald Trump's order on Monday to expand telehealth access to 57 million Americans.
Teladoc's shares fell, however, as analysts questioned whether the company has massively overpaid for Livongo, shares in which are up 477% this year.
"The Street views the price being paid as fairly high," said David Larsen, an analyst with research firm Verity Research.
Demand for virtual healthcare has skyrocketed as the pandemic kept patients from visiting doctors, with one recent study estimating 46% of Americans now use telehealth, up from 11% in 2019.
Pre-COVID-19, the total annual revenues of U.S. telehealth players were an estimated $3 billion, whereas consultants McKinsey & Company now estimate up to $250 billion of U.S. healthcare spending could be virtualized.
The deal will give Livongo's customers, who typically get physiotherapy and other proactive treatments for chronic illnesses through coaches on its system, direct access to physicians who can write prescriptions for them.
Analysts estimated there was less than a 25% overlap between the client bases of the two companies.
Teladoc will pay 0.5920 of a share plus $11.33 in cash for each Livongo share, amounting to $158.98, a 10% premium to Livongo's closing price on Tuesday and adding up to a purchase price of about $15.6 billion, according to Reuters calculations.
Shares in Teladoc, for which access to capital has been bolstered by a doubling of its market value since January, fell 14.1%. Livongo was down 6.3%.
(Reporting by Manas Mishra and Noor Zainab Hussain in Bengaluru; Editing by Shinjini Ganguli and Patrick Graham)