Amazon.com (NASDAQ:AMZN), Inc. is expanding its presence in the healthcare industry with the announcement that it will acquire primary-care business One Medical (NASDAQ:ONEM) for $3.9 billion, including debt. The online retail behemoth announced that it would pay $18 per share for One Medical’s parent firm, 1Life Healthcare Inc. of San Francisco. This is over 77 % above 1Life’s Wednesday closing price of $10.18 and nearly 29 % above its IPO price of $14 per share in January 2020.
About One Medical
One Medical (NASDAQ:ONEM) maintains 182 medical offices in 25 areas around the United States, including 36 in the Bay Area, its home market. It provides customers with access to physicians at its clinics as well as digital health services around the clock. The sale to Amazon (NASDAQ:AMZN) follows claims earlier this month that One Medical (NASDAQ:ONEM) had received buyout bids from potential acquirers, including CVS Health Corp. (NYSE:CVS). Primary care is one of the least profitable medical businesses, although merchants, health insurers, and pharmacies have recently shown interest in it. Last year, Walgreens Boots Alliance Inc. (Nasdaq:WBA) agreed to pay $5.2 billion for a majority stake in clinic chain VillageMD.
One Medical (NASDAQ:ONEM) began as an early effort to modernize primary care services by establishing upscale clinics in urban areas that individuals or their employers paid a fee to join. The organization claimed, for an annual subscription, more accessible access to appointments and virtual consultations and superior customer service compared to conventional medical clinics. It formed agreements with significant health networks, such as New York’s Mount Sinai Health System, to refer individuals for specialty care.
In contrast to other investor-backed clinic chains, such as Oak Street Health Inc. (NYSE:OSH), One Medical (NASDAQ:ONEM) has historically emphasized fee-for-service medical care rather than the new payment methods that the majority of the sector is adopting. Last year, the business acquired the Medicare-focused chain Iora Health Inc. for $1.4 billion, a company known for attempting to redefine senior care by enhancing quality while controlling costs.
Struggles of Clinic Operators
Despite billions of dollars invested in firms attempting to redefine primary care, clinic operators have struggled on the public markets in recent months, and their valuations have decreased. Before the announcement of the agreement, One Medical (NASDAQ:ONEM) was trading below its 2020 initial public offering price. Earlier this month, it was reported that One Medical (NASDAQ:ONEM) was reviewing its options after receiving buyout interest from CVS.
“We think health care is high on the list of experiences that need to reinvent,” Amazon (NASDAQ:AMZN) Health Services head Neil Lindsay said in announcing the partnership on Thursday. His division developed an online pharmacy when Amazon (NASDAQ:AMZN) acquired PillPack Inc. for $1 billion in 2018. Additionally, it has established a primary-care facility for its employees and other businesses. Acquiring One Medical (NASDAQ:ONEM) would be Amazon’s third-largest ever. It paid $13 billion for Whole Foods Market in 2017 and $8.5 billion earlier this year for film company Metro-Goldwyn-Mayer.
In the announcement, Amir Dan Rubin, who will remain CEO of One Medical (NASDAQ:ONEM), described Amazon’s acquisition as “exciting.” There is a tremendous chance to make health care more accessible, inexpensive, and even pleasurable for consumers, providers, and payers, he stated. Together, we anticipate innovating and extending access to high-quality healthcare services. The transaction is subject to the customary closing conditions, including shareholder and regulatory clearance.
After the announcement of the deal, One Medical (NASDAQ:ONEM) shares (Nasdaq:ONEM) surged as much as 69 % to $17.22 in early trading. In early trade, shares of Amazon (NASDAQ:AMZN) fell by almost 1 %.
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