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In commenting on the merger, Martin J Wygod, Chairman and Acting CEO ofHLTH and Chairman of WebMD said, "This merger will achieve the objectives setforth by both companies at the beginning of this process. The merger isexpected to reduce WebMD's share count by 20%, to eliminate HLTH's controllinginterest in WebMD and to capitalize WebMD with approximately $700 million incash and investments. As a result, WebMD will be well positioned to pursuefuture opportunities. Based on yesterday's closing prices, HLTH shareholderswill receive a 26% premium for their shares and direct ownership in WebMD.Upon completion of the merger, HLTH shareholders will own approximately 80% ofWebMD, based on the shares currently outstanding at HLTH and WebMD."
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The cash portion of the merger consideration will be funded from cash andinvestments at WebMD and HLTH, and proceeds from HLTH's anticipated sales ofits ViPS and Porex businesses. As previously announced, HLTH has receivedsignificant interest from potential strategic buyers for both ViPS and Porexand will be moving rapidly to obtain formal offers for these businesses frompotential buyers. HLTH announced today that it intends to divest thesebusinesses. These divestitures are not dependent on the merger and do notrequire shareholder approval. After the close of the merger and thedivestitures of ViPS and Porex, it is expected that WebMD will continue tobenefit from significant remaining Federal net operating loss carryforwards.The cash portion of the merger consideration is subject to downward adjustmentprior to closing, based on the amount of proceeds received from thedisposition of HLTH's investment in certain auction rate securities (ARS),which, under the terms of the merger agreement, must be liquidated by HLTHprior to closing of the merger. As described in a separate press releaseissued by HLTH today, HLTH has approximately $195 million of investments incertain ARS, excluding any ARS investments held by WebMD. The types of ARSinvestments that HLTH owns are backed by student loans, 97% of which areguaranteed under the Federal Family Education Loan Program (FFELP).
If either ViPS or Porex has not been sold at the time the HLTH-WebMDmerger is ready to be consummated, WebMD may issue up to $250 million inredeemable notes to the HLTH shareholders in lieu of a portion of the cashconsideration otherwise payable in the merger. The notes would bear interestat a rate of 11% per annum, payable in kind annually in arrears. The noteswould be subject to mandatory redemption by WebMD from the proceeds of thedivestiture of the remaining ViPS or Porex business. The redemption pricewould be equal to the principal amount of the notes to be redeemed plusaccrued but unpaid interest through the date of the redemption.
Based on the shares currently outstanding at both HLTH and WebMD, therewill be approximately 45 million shares of WebMD common stock outstandingfollowing the closing of the merger, which will represent a reduction ofapproximately 20% from the 57 million WebMD shares currently outstandingtoday. Additionally, it is estimated that WebMD will have approximately $700million in available cash and investments after receiving the anticipatedproc
