iVillage's Post-Christmas Purchase

According to iVillage's (Nasdaq: IVIL) CEO, Douglas McCormick, women are the chief operating officers of health-care decisions in American families. In fact, women make more than 80% of all health-care purchase decisions.

In light of this, iVillage's purchase of Healthology, Inc., appears to make a lot of sense. iVillage considers itself the "Internet for Women," and privately held Healthology is a leading producer and distributor of physician-generated health and medical information on the Internet.

iVillage has certainly learned hard lessons from its past dot-com deals. Its current M&A approach is much more disciplined: A target must have a strong fit with the business; there must be an ability to integrate the target without great effort and expense; and there needs to be meaningful contribution of top-line and bottom-line growth.

The purchase price comes to $17.2 million, which includes $1.7 million in equity and $15.5 million in cash. And, yes, the acquisition is expected to be accretive for full-year 2005 diluted net income per share.

Integration should be seamless. After all, both companies have been involved in a strategic partnership since 2001, and the headquarters are two streets apart.

Moreover, Healthology's content is trusted and detailed, with more than 1,200 streaming videos and 2,000 articles. The company also has content distribution deals with major companies such as Yahoo! (Nasdaq: YHOO) and Disney (NYSE: DIS).

But with the deal, Healthology can further monetize its content with iVillage's extensive distribution channels, such as with Microsoft's MSN (Nasdaq: MSFT). There are also opportunities to sell advertising to big pharmas such as Merck (NYSE: MRK) and Pfizer (NYSE: PFE).

iVillage also upped its guidance. Revenues are expected to come in around $86 million to $87 million for 2005, which is a $10 million increase from prior consensus forecasts.

It was certainly enough to make investors happy. On the news, iVillage's stock price surged over 6% to $6.35 Monday, and opened at $6.55 in today's trading.

Fool contributor Tom Taulli does not own shares mentioned in this article.