Amazon strikes $3.5 billion deal for One Medical in long march into U.S. healthcare

Amazon strikes $3.5 billion deal for One Medical in long march into U.S. healthcare

by Joseph Anthony
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FILE PHOTO: An Amazon logo is pictured at a logistics centre in Mannheim, Germany, September 17, 2019. REUTERS/Ralph Orlowski/File Photo

Amazon.com Inc AMZN.O agreed to buy primary care provider One Medical ONEM.O for $3.49 billion, expanding the e-commerce giantโ€™s virtual healthcare and adding brick-and-mortar doctorsโ€™ offices for the first time.

The all-cash deal would combine two relatively small players as Amazon continues a years-long march into U.S. healthcare, seeking to grow at a faster pace.
The online retailer first piloted virtual care visits for its own staff in Seattle in 2019 before offering services to other employers under the Amazon Care brand. It likewise bought online pharmacy PillPack in 2018, underpinning a prescription delivery and price-comparison site it later launched.
โ€œWe think healthcare is high on the list of experiences that need reinvention,โ€ said Neil Lindsay, senior vice president of Amazon Health Services.
The Seattle-based retailer has signaled its ambitions to improve and speed up care. However, a big idea akin to how Amazon has automated the role of cashiers in grocery stores has yet to emerge.
In One Medical, Amazon is acquiring a loss-making company with 767,000 members and enterprise clients such as Airbnb Inc ABNB.O and Alphabet Incโ€™s GOOGL.O Google, which offer its services as a benefit to employees, according to its website and recent financial results.
Larger rival Teladoc Health Inc TDOC.N, by contrast, has more than 54 million paying members in the United States and double One Medicalโ€™s quarterly revenue. News of the Amazon deal sent shares of Teladoc as well as drugstore retailers CVS Health Corp CVS.N and Walgreens Boots Alliance Inc WBA.O down between 0.3% and 1.8%.
The acquisition makes sense as the โ€œblending of virtual and in-person care is core to both One Medical and Amazon Careโ€™s strategy,โ€ said Citi analyst Daniel Grosslight.
DEAL SCRUTINY EXPECTED
U.S. Senator Amy Klobuchar, who is also the Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights on Thursday urged the Federal Trade Commission (FTC) to investigate Amazonโ€™s proposed deal, expressing concerns over the acquisitionโ€™s implications for personal health data.
โ€œAmazon has a history of engaging in business practices that raise serious anticompetitive concerns, including forcing small businesses on its site to buy its logistics services as a condition of preferred platform placement, using small businessesโ€™ non-public data to compete against themโ€ฆ..โ€ the Senator added in her statement.
Amazon Care recently made its virtual care accessible nationwide and added the option for house-calls in Los Angeles, Washington, Dallas and elsewhere. The COVID-19 pandemic helped increase demand as Amazon Care started signing up clients including Hilton Worldwide Holdings Inc HLT.N. Read full story
One Medical, founded in 2007, now gives Amazon 188 medical offices, its recent financial report showed.
Carlyle Group Inc CG.O, which had paid $350 million for a minority stake in One Medical in 2018, will exit its position as part of Amazonโ€™s acquisition, people familiar with the matter said.
Amazon agreed to pay $18 for each share of One Medical, a premium of 76.8% to the healthcare firmโ€™s last close. One Medical shares were trading at $17.12.
The deal is valued at $3.9 billion including One Medicalโ€™s net debt.
Amazonโ€™s limited healthcare presence should minimize antitrust issues, but risks remain, analysts said.
Grosslight said Amazon โ€œdoes seem to have a target on its back, and the DOJ (the U.S. Department of Justice) has been very aggressive in blocking deals recently.โ€
โ€œThat will most definitely subject this acquisition to more scrutiny than normal.โ€
REUTERS

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