Healtheon, WebMD Finally Merge

After widespread speculation, online medical companies Healtheon Corp. and WebMD Inc. Thursday agreed to merge in a $5.5 billion deal that will further transform the Internet into a health care platform.

The merger will create a Web-based company that will provide health care information to doctors and the general public. Terms call for 1.815 Healtheon shares to be exchanged for each WebMD share. WebMD and Healtheon will equally control the new company, whose name was not specified.

The companies also announced a number of technology heavyweights plan to invest $360 million in the new company, with Microsoft Corp. leading the pack.

Microsoft will invest $250 million in the venture, Excite will provide $25 million and Intel Corp. will invest an unspecified amount.

Healtheon and WebMD will each have four seats on the new company’s board of directors and Microsoft will also have a representative.

The new company will be based in Atlanta with technology operations headquartered in Santa Clara, Calif. It will employ more than 1,300 including 340 engineers.

Healtheon Chairman and Co-Founder James Clark will join the company’s board. W. Michael Long, Healtheon’s chief executive officer, will become chief operating officer and chairman of the new company. Jeff Arnold, WebMD’s CEO, will be CEO.

“Healtheon/WebMD will be a leader in Internet health care services and e-commerce with the technology, brand name and financial resources to transform the delivery of care by connecting all participants in the health care industry,” Clark said.

Long said connecting physicians, health care institutions and consumers and providing them with reliable and secure services will improve the efficiency of the health care industry.

“Healtheon’s ability to develop and deploy Internet-based services, combined with WebMD’s ability to establish a compelling brand that attracts consumers and physicians is a powerful marketplace combination,” he said.

Investors were applauding the deal in early trading Thursday, sending Healtheon (HLTH) shares soaring 31-3/4 to 112.