Amazon’s Latest Takeover Deal — And My Plan To Profit From Their Next Move…
For most of the first half of the year, investors have been preoccupied with the Russia-Ukraine war, rising inflation, and climbing interest rates.
Understandably, this put a damper on the markets. And the same can be said for deal-making activity.
But things could be heating up as we head into the second half of the year. In fact, according to a recent KPMG survey of 360 U.S. business leaders, nearly 80% of respondents reported that their appetite for making deals is as strong or even stronger than in 2021.
We may have just witnessed the first pebble thrown in the pond. And if I’m right, it could lead to a wave of deals.
Can you guess who threw it?
That’s right. Jeff Bezos and friends. Amazon is reportedly buying a primary healthcare clinic called 1LifeHealthcare (Nasdaq: ONEM), parent of One Medical, for $3.49 billion in cash. The purchase price nets down to $18 per share, a premium of nearly 80% over ONEM’s prior closing price of $10.18.
As you can see from the infographic below (which doesn’t reflect the ONEM deal), this is the third-largest acquisition in Amazon’s history…
Amazon’s aspirations in the healthcare field are well known.
The e-commerce giant shelled out $1 billion several years ago for an online pharmacy called PillPack that led to the launch of a nationwide prescription delivery service. Meanwhile, the Amazon Care network (initially a pilot program offering virtual doctor’s visits and personal house calls to Seattle-area Amazon employees) has been rolled out nationwide. Then there’s Halo, the wearable health and fitness tracker device.
Amazon has built an entire Health Services division skippered by a marketing genius who used to head up the Amazon Prime subscription program. Ever the disruptor, Amazon wants to shake up and “reinvent” the traditional healthcare delivery model – and this acquisition can accelerate that goal.
One Medical operates a network of 182 doctor’s offices in two dozen major metro markets around the country. The company has made a big push into the budding telehealth field and offers 24/7 virtual consultations with its physicians. According to the Wall Street Journal, it has already attracted more than 8,000 corporate clients (including Google) who offer the dedicated fee-based medical services to their employees.
Yet, the stock has struggled since its 2020 market debut, sinking almost 40%. Amazon’s well-timed purchase provides an opportune exit point for early private-equity backers. Meanwhile, Teladoc (Nasdaq: TDOC), a former Takeover Trader holding and undisputed leader of the telehealth field, initially sagged on the news before quickly turning higher. While the market fears Amazon’s encroachments, the whopping premium attached to this deal should help boost valuations in this niche.
My Plan To Profit From Amazon’s Next Move…
In any case, this is an important reminder that mergers aren’t always driven by the need to wring out cost-savings synergies between two similar organizations operating in the same sphere. Sometimes, when a business is seeking to enter a new market, the goal is to seize assets that can act as a springboard.
The same can be said of Amazon’s $13 billion takeover of grocer Whole Foods. To be sure, Amazon could have eventually spent enough money to muscle its way into the telehealth space. But this acquisition will speed up the timeline while allowing the company to assimilate distinctive technology and consolidate market share.
Which brings us to the heart of why this news from Amazon matters…
Whenever a disruptive new force changes the playing field in an industry, the incumbent leaders are forced to respond. That often means either retooling internally or pairing up with someone who already has a head start in a new direction.
The name of the game: innovate, acquire, or get left behind.
Over at Takeover Trader, I’ve been telling readers that I think these forces are beginning to influence the payments industry.
Consider this… In the U.S. alone, consumers spend about $13 trillion annually on goods and services. More than half of those sales ($7.3 trillion) are paid for using debit, credit, and pre-paid cards, not counting electronic transfers for rent, utilities, and other payments.
Cash still accounts for nearly one in three transactions nationally, but most tend to be small purchases of $10 or less. For larger outlays – and most e-commerce activity — plastic is the dominant means of payment. And with the fees charged to access their networks, the credit card oligopoly almost prints money for its shareholders.
This is an industry ripe for disruption. And I think Amazon has this sector in its crosshairs.
In fact, Amazon already has its foot in the door in the form of a co-branded credit card. But what if there were a way for Amazon to cut the middle man out entirely from the loop?
If you were generating $470 billion in yearly revenue but had to fork over a percentage of nearly every one of those sales in the form of a credit card fee, you’d at least think about it. Right?
It’s entirely within the realm of possibility, especially when you have a $90 billion war chest of cash sitting on the balance sheet. But similar to the 1LifeHealthcare deal, I think Amazon will opt to acquire a scrappy rival rather than take the likes of American Express and Visa head on.
And if that happens, then investors in the target company could enjoy a massive payday.
That’s why I’ve just put the finishing touches on a groundbreaking new report that reveals what you need to know about this one-of-a-kind takeover opportunity. Go here to learn more now.