Forbes
Joe Cornel
April 12, 2021
The Nuance Communications Inc. logo on a laptop computer arranged in Dobbs Ferry, New York, U.S., on … [+]
© 2021 Bloomberg Finance LP
Deal Overview
On April 12, 2021, Nuance Communications, Inc. (NASDAQ : NUAN, $53.20, Market Capitalization $15.2 billion) announced a definitive agreement with Microsoft (MSFT) under which Microsoft will acquire Nuance for $56.00 per share, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt.
The acquisition price represents a 23% premium to Nuance’s closing price of $45.58 as on Apr 9.
The transaction has been unanimously approved by the Boards of Directors of both Nuance and Microsoft.
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, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment. Microsoft expects the acquisition to be minimally dilutive (less than 1%) in FY22 and to be accretive in FY23 to non-GAAP earnings per share, based on the expected close time frame.
The acquisition will not impact the completion of Microsoft’s existing share repurchase authorization (~21 billion remaining).
Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft. Goldman Sachs & Co . LLC is acting as an exclusive financial advisor to Microsoft, while Simpson Thacher & Bartlett LLP is acting as its legal advisor. Evercore is acting as an exclusive financial advisor to Nuance, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as its legal advisor.
We had dropped coverage on Nuance Communications, Inc. on March 31, 2021 and our last report was published on August 12, 2020.
Nuance Communications Price Performance and Spin-Off Details
Spin-Off Research
Deal Rationale
Microsoft has accelerated its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities.
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.
Microsoft’s acquisition of Nuance builds upon the successful existing partnership between the companies that was announced in October 2019, where the companies had entered into a strategic partnership to help transform healthcare delivery for a more sustainable future.
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 will be better able to empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services.
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.
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.
Nuance is a pioneer and a leading provider of conversational AI and cloud based ambient clinical intelligence for healthcare providers.
Nuance is a pioneer and a leading provider of conversational AI and cloud based ambient clinical intelligence for healthcare providers.
Nuance’s products, such as the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all leading clinical speech recognition SaaS offerings, are built on Microsoft Azure.
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.
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 the Nuance’s fiscal year 2020 (ended September 2020).
Besides healthcare, Nuance provides AI expertise and customer engagement solutions across Interactive Voice Response (IVR), virtual assistants, and digital and biometric solutions to companies around the world across all industries.
This expertise will come together with the breadth and depth of Microsoft’s cloud, including Azure, Teams, and Dynamics365, to deliver next-generation customer engagement and security solutions.
Therefore, Nuance’s acquisition represents the latest step in Microsoft’s industry specific cloud strategy.
Microsoft has held talks to acquire a number of large technology companies in the past year. Amazon , Appl e, Google and Facebook have been specifically targeted by Congress as abusing market power while Microsoft has avoided the same scrutiny. ]
Microsoft’s CEO, Satya Nadella, had said that the reason why Microsoft has avoided scrutiny is that the company’s approach is purely about platform providers and not just some aggregation play.
… Microsoft has avoided scrutiny is that the company’s approach is purely about platform providers and not just some aggregation play.
The Nuance acquisition comes about a month after Microsoft closed its $7.6 billion deal for ZeniMax, the parent company of video game publisher Bethesda.
Since the spin-off of Cerence, Nuance has outperformed S&P 500 by 215% and has been a multi-bagger.
Nuance’s outperformance can be attributed to its shift in focus on Healthcare and Enterprise business since the spin-off and its consistent financial performance over the past two years.
Nuance’s outperformance can be attributed to its shift in focus on Healthcare and Enterprise business …
Company Description
Microsoft Corp
Microsoft is a technology company whose mission is to empower every person and every organization on the planet to achieve more. The company’s platforms and tools help drive small business productivity, large business competitiveness, and public sector efficiency. The company generates revenue by offering a wide range of cloud based and other services to people and businesses, licensing and supporting an array of software products, designing, manufacturing, and selling devices, and delivering relevant online advertising to a global audience. The company reports its financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. For FY20, the company recorded revenues of $ 143.01 billion.
Nuance Communications, Inc.
Nuance Communications, Inc. provides conversational artificial intelligence (AI). The company delivers solutions that understands, analyzes, and responds to people. The company provides healthcare AI solutions and services, omnichannel customer engagement, and Dragon consumer and Enterprise. The company works with various organizations across healthcare, financial services, telecommunications, government, and retail. The company operates through three segments: Healthcare, Enterprise, and Other. Its Healthcare segment is a provider in clinical speech and clinical language understanding solutions. The Enterprise segment is primarily engaged in using speech, natural language understanding, and artificial intelligence to provide automated customer solutions and services for voice, mobile, Web, and messaging channels. For FY20, the company reported revenues of $1.5 billion.
Originally published at https://www.forbes.com.
