Confirmed: Microsoft (MSFT) Buying Nuance (NUAN) In $19.7 Billion Deal

By Amit Chowdhry ● April 12, 2021
  • It has been confirmed that Microsoft Corp (Nasdaq: MSFT) is buying Nuance Communications, Inc. (Nasdaq: NUAN) for $56 per share. These are the details.

It has been confirmed that Microsoft Corp (Nasdaq: MSFT) is buying Nuance Communications, Inc. (Nasdaq: NUAN) for $56 per share, a 23% premium to the closing price of Nuance on Friday, April 9, in an all-cash deal valued at $19.7 billion, inclusive of Nuance’s net debt. Nuance is known as a trusted cloud and AI software leader representing decades of accumulated healthcare and enterprise AI experience. And Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft. The deal is intended to close this calendar year.

Microsoft said it has accelerated its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities. And these efforts include the Microsoft Cloud for Healthcare (introduced in 2020) – which aims to address the comprehensive needs of the rapidly transforming and growing healthcare industry. This acquisition announcement represents the latest step in Microsoft’s industry-specific cloud strategy.

Nuance’s products include the Dragon Ambient eXperience, Dragon Medical One, and PowerScribe One for radiology reporting, all leading clinical speech recognition SaaS offerings built on Microsoft Azure. And Nuance’s solutions work seamlessly with core healthcare systems, including longstanding relationships with Electronic Health Records (EHRs), to alleviate the burden of clinical documentation and empower providers to deliver better patient experiences. Plus Nuance solutions are currently used by more than 55% of physicians and 75% of radiologists in the U.S., and used in 77% of U.S. hospitals. Nuance’s Healthcare Cloud revenue experienced 37% year-over-year growth in Nuance’s fiscal year 2020 (ended September 2020).

Microsoft’s acquisition of Nuance builds upon the successful existing partnership between the two companies that was announced in 2019. And by augmenting the Microsoft Cloud for Healthcare with Nuance’s solutions, as well as the benefit of Nuance’s expertise and relationships with EHR systems providers, Microsoft can empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services. And the acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in healthcare to nearly $500 billion. Plus Nuance and Microsoft will deepen their existing commitments to the extended partner ecosystem, as well as the highest standards of data privacy, security, and compliance.

The deal has been unanimously approved by the Boards of Directors of both Nuance and Microsoft. And the deal is intended to close by the end of this calendar year and is subject to approval by Nuance’s shareholders, the satisfaction of certain regulatory approvals, and other customary closing conditions.

Upon closing of the deal, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment. And Microsoft expects the acquisition to be minimally dilutive (less than 1%) in fiscal year 2022 and to be accretive in fiscal year 2023 to non-GAAP earnings per share, based on the expected close timeframe. The non-GAAP excludes expected impact of purchase accounting adjustments, as well as integration and transaction-related expenses. This acquisition will not impact the completion of its existing share repurchase authorization.

KEY QUOTES:

“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI. AI is technology’s most important priority, and healthcare is its most urgent application. Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud in Healthcare and Nuance.”

— Satya Nadella, CEO, Microsoft

“Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions. To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care. The path forward is clearly with Microsoft — who brings intelligent cloud-based services at scale and who shares our passion for the ways technology can make a difference. At the same time, this combination offers a critical opportunity to deliver meaningful and certain value to our shareholders who have driven and supported us on this journey.”

— Mark Benjamin, CEO, Nuance