Telehealth specialist Teladoc Health (NYSE:TDOC) announced Sunday that it plans to acquire privately held InTouch Health in a cash-and-stock deal valued at $600 million. The deal establishes Teladoc as the only virtual care provider with a full range of coverage -- from critical to chronic to everyday care -- through a single solution across all sites of care worldwide.

InTouch's combination of software, integrated technology, and specially designed devices has made it the leading provider of enterprise telehealth solutions, the choice of more than 450 hospitals and healthcare systems, used by 14,500 physicians globally. Adding InTouch's more than 40 clinical use cases to Teladoc's industry-leading video conferencing platform will help secure the company's position as the "clear leader in providing virtual care solutions."

Investors cheered the news, bidding up Teladoc's stock more than 15% on Monday.

An elderly woman videoconferencing with a doctor on a laptop.

Image source: Getty Images.

The details

The deal will be funded using $150 million in cash and $450 million in Teladoc stock and is expected to close by the end of the second quarter, subject to customary closing conditions.

Teladoc estimates that InTouch Health will generate $80 million in revenue for full-year 2019, up 35% year over year. For its part, Teladoc was forecasting full-year 2019 revenue of about $548 million and adjusted EBITDA of $30 million at the midpoint of its guidance prior to the acquisition. Teladoc plans to provide updated 2020 guidance for the combined company upon the closing of the transaction.

"Today marks a bold leap forward in Teladoc Health's mission to transform how high-quality healthcare is accessed and experienced, making virtual care available for patients with even the most critical care needs," said Jason Gorevic, CEO of Teladoc Health. "Bringing these companies together will make Teladoc Health the clear virtual care leader across every front door of healthcare, further accelerating the adoption and impact of virtual care for millions of people around the world."

The opportunity

This deal comes at a time of explosive growth in the digital care space. Virtual medical consultations let patients check in with a medical professional from the comfort of their own home using a desktop or mobile device, reducing the need for time-consuming office visits while also providing increased access to care and improved outcomes for patients.

According to research conducted last year by JPMorgan, 40% of hospitals surveyed planned to increase their budgets to provide greater access to telemedicine for their patients. Virtual care is becoming a crucial strategy to advance consumer engagement and the quality of care. Teladoc said 61% of hospital revenue is expected to come from managed and value-based care models by 2021, according to an L.E.K. 2018 Hospital Study Survey.

Additional details and preliminary Q4 results

At the JPMorgan Healthcare Conference on Monday, Gorevic provided additional details about why the acquisition of InTouch was such a compelling opportunity. He pointed out that InTouch's focus on providing telemedicine solutions to hospitals and health systems was a complement to Teladoc's traditional focus on healthcare providers and patients, expanding Teladoc's reach into "every entry point in the healthcare system." Gorevic explained that customers of both companies have been asking for a single telemedicine solution for their patients, and the combined company provides a solution across the entire landscape of healthcare. One of the biggest opportunities will be that of cross-selling and upselling the newly expanded capabilities across its existing customer base.

Gorevic also provided preliminary results for Teladoc's fourth quarter, saying that the company exceeded both internal and external revenue expectations. While the company had forecast revenue of $153 million at the top end of its guidance, Teladoc now expects to report revenue of between $155 million and $156 million. The results also easily surpassed analysts' consensus estimates of $151.68 million.

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