July 27, 2016 / 8:20 PM / 3 years ago

Wellness platform Sharecare to buy health business from Healthways

(Reuters) - Sharecare Inc, a U.S. health and wellness online platform co-founded by TV personality Dr. Oz, has agreed to acquire the healthy living business of peer Healthways Inc HWAY.O, the companies said on Wednesday.

The sale, first reported by Reuters, offers a way for Healthways to refocus its efforts and investments away from its unprofitable population health division toward its growing targeted health programs business, which includes the Silver Sneakers Fitness brand, one of the country’s largest exercise programs for seniors.

“We did not have the time or the appetite to undertake the large amount of investment needed to restore competitiveness to the population health space,” Healthways Chief Executive Donato Tramuto told Reuters in an interview.

For Sharecare, the acquisition represents an opportunity to boost revenue rapidly and gain clients, including national health insurer Anthem Inc (ANTM.N).

It expects to significantly cut costs by integrating Healthways various offerings onto its digital platform, Sharecare Chief Executive Jeff Arnold told Reuters in an interview.

The population health business uses coaching and clinical protocols to improve the overall health of employees and insurance plan members.

As part of the deal, Healthways Chief Financial Officer Alfred Lumsdaine will move to Sharecare. He will be joined by the president of Healthways population health division, Sean Slovenski.

Atlanta-based Sharecare agreed to pay $30 million of its shares for the business, which generates about $250 million in revenue.

In addition, Nashville, Tennessee-based Healthways is paying ShareCare $25 million upfront to cover expected losses from the population health business.

It also agreed, if need be, to forfeit up to $20 million of its ShareCare equity stake to offset negative cash flow not covered in the upfront payment.

After the deal, Healthways expects 2016 sales to exceed $500 million, with margins for earnings before interest, taxes, depreciation and amortization (EBITDA) of around 20 percent.

Healthways reported a net loss of $0.39 per share in the first quarter.

In 2014, Healthways agreed to a strategic review in response to pressure from activist North Tide Capital. It decided against a sale in 2015.

Healthways hired a new chief executive, Donato Tramuto, in 2015. He announced plans for a corporate restructuring in October focused largely on cutting costs.

Sharecare’s Arnold previously founded and led consumer health company WebMD Health Corp WBMD.O.

Reporting by Carl O'Donnell; Editing by Steve Orlofsky

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