American Well Corp. (NYSE: AMWL) reportedly took a stab at getting the management of Talkspace Inc. (Nasdaq: TALK) to talk about a takeover deal.
However, Talkspace passed on the offer “before any numbers were discussed,” according to a report by the financial markets content service Seeking Alpha, citing unnamed sources.
If true, this would mark the second time that Talkspace, a New York-based virtual mental health company, rejected a potential suitor. Behavioral Health Business reached out to representatives of both companies but has yet to hear back from either.
At the end of May, reports emerged that Sacramento, California-based outpatient mental health clinic operator Mindpath Health and Talkspace were in deal talks. No deal materialized.
The Mindpath deal reportedly included a per share price range of $2.50 to $3 a share and would have implied a maximum consideration of about $465 million. Seeking Alpha did not publish any financial details of Amwell’s rumored approach.
Talkspace’s market capitalization at the time of its IPO was about $1.4 billion. Today, that number is about $256 million, according to Yahoo Finance, an 82% reduction.
The Seeking Alpha report also alleges that some of the firms that hold stakes in Talkspace are encouraging a takeover, but it didn’t name any.
The two largest shareholders in the company are a fund of the San Francisco-based venture firm Norwest Venture Partners and Hudson Executive Capital LP, the New York City investment group that took Talkspace public through a SPAC it managed in June 2021. Each firm holds a 9.5% stake in the company, according to Securities and Exchange Commission documents.
Talkspace Interim CEO and Chairman Doug Braunstein is the founder and a managing partner of Hudson Executive Capital.
The three other firms rounding out the top five institutional holders in Talkspace – Revolution Growth Management Company, Harbor Spring Capital LLC and Goldman Sachs Group Inc. – hold a 17% stake in the company.
Talkspace leaders have previously indicated that they aren’t looking for a takeover. Braunstein said during the company’s annual 2021 earnings call that the company was focused on its turnaround plan.
This isn’t the first time that chatter around Talkspace has included the mention of investors pushing management to make a deal. Citi analyst Daniel Grosslight wrote that the firm had spoken with investors that favored a sale of the company.
“Our recent conversations [with major shareholders] lead us to believe that an acquisition at these levels is more likely than we initially contemplated,” Grosslight wrote in a note.
Jefferies Research Services released a March analyst note that the massive demand for behavioral health services has amped up investor interest in behavioral health and upped the interest of health care entities in tech-focused services.
“With [Talkspace] valued just above cash, we believe ample potential buyers could emerge on the M&A front, particularly PE buyers or a large diversified player looking to get into the behavioral health space,” the Jeffries note explained. “Despite the operational challenges, the company operates in an attractive and growing market for behavioral health services.”
Amwell has previously stated that it sees a major opportunity — a $52 billion international market — in virtual mental health, making a takeover of Talkspace well within the realm of possibility.
It acquired SilverCloud Health, which is a virtual mental health program that focuses on self-guided cognitive behavioral therapy that is supplemented by a therapist, in August 2021 as a way to expand its virtual health offerings. Amwell in May announced it was accelerating the integration of the business.
Amwell, whose telehealth solutions are used by over 2,000 hospitals and 55 health plan partners, additionally rolled out its own behavioral health program last month.
“Increased demand for behavioral health care and a growing shortage of clinicians is resulting in a crisis that is driving worse outcomes and higher costs for the entire health care industry,” Dr. Ido Schoenberg, chairman and CEO of Amwell, said at the time.
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