By Manas Mishra and Jeffrey Dastin
(Reuters) -Amazon.com Inc on Thursday agreed to buy primary care provider One Medical for $3.49 billion, expanding the e-commerce giant's virtual healthcare and adding brick-and-mortar doctors' offices for the first time.
The all-cash deal would combine two relatively small players as Amazon (NASDAQ:AMZN) 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.
"We think healthcare is high on the list of experiences that need reinvention," said Neil Lindsay (NYSE:LNN), 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 and Alphabet (NASDAQ:GOOGL) Inc's Google, which offer its services as a benefit to employees, according to its website and recent financial results.
Larger rival Teladoc (NYSE:TDOC) Health Inc, by contrast, has more than 54 million paying members in the United States and double One Medical's quarterly revenue. News of the Amazon deal sent shares of Teladoc as well as drugstore retailers CVS Health Corp (NYSE:CVS) and Walgreens Boots Alliance (NASDAQ:WBA) Inc down between 0.3% and 1.8%.
The acquisition makes sense as the "blending of virtual and in-person care is core to both One Medical and Amazon Care's strategy," 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 Amazon's proposed deal, expressing concerns over the acquisition's implications for personal health data.
"Amazon 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 businesses' non-public data to compete against them....." 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 (NYSE:HLT) Inc.
One Medical, founded in 2007, now gives Amazon 188 medical offices, its recent financial report showed.
Carlyle Group (NASDAQ:CG) Inc, which had paid $350 million for a minority stake in One Medical in 2018, will exit its position as part of Amazon'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 firm's last close. One Medical shares were trading at $17.12.
The deal is valued at $3.9 billion including One Medical's net debt.
Amazon's limited healthcare presence should minimize antitrust issues, but risks remain, analysts said.
Grosslight said Amazon "does 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."
"That will most definitely subject this acquisition to more scrutiny than normal."