Nuance Communications, Inc. has signed an agreement to acquire Boston-based eScription, a medical transcription technology company. The deal, which is expected to close in Nuance's fiscal third quarter 2008, is valued at about $363 million.
The transaction comprises $340 million in cash and $23 million in Nuance common stock, plus the assumption of vested employee options with a value of about $37 million.
The deal will give Nuance new technology, a strong customer base, recurring revenue and margin expansion from new service offerings, Nuance officials said.
"In 2005, Nuance set forth to transform the nation's stagnant healthcare documentation process through speech-enabled solutions and has since seen rapid growth within our healthcare business," said Paul Ricci, chairman and CEO at Nuance. "eScription's strengths in computer aided medical transcription workflow will accelerate our delivery of solutions that improve the way patient data is captured, processed and used."
He said the combined company would focus on continued innovation to evolve healthcare documentation and lower transcription costs by more than $1 billion over the next few years.
"Nuance has experienced robust demand for its on-demand, hosted healthcare solution, iChart, in recent years, with growth in the range of 30 to 40 percent," said Robert Wise, president of Nuance's healthcare division. "eScription's exclusive focus on building a highly efficient, scalable on-demand platform will allow Nuance to more completely address the continuing demand in this recurring revenue model.
Nuance expects the acquisition to add between $16 million and $18 million in non-GAAP revenue in fiscal 2008 and between $63 million and $68 million in fiscal 2009. Adjusting for revenue lost to purchase accounting, Nuance expects GAAP revenue from eScription between $13 million and $15 million in fiscal 2008 and $56.5 million and $61.5 million in fiscal 2009.
In connection with the transaction, Warburg Pincus, the global private equity firm and an investor in technology companies, has agreed to purchase 5,760,369 shares of Nuance common stock at a purchase price of $17.36 per share, the closing price on Friday, April 4, 2008, for an aggregate investment of $100 million. In addition, Warburg Pincus will acquire a warrant to purchase 3.7 million shares of Nuance common stock upon the closing of the investment.