Microsoft Corp. has agreed to acquire health care artificial intelligence software provider Nuance Communications in a deal valued at $19.7 billion, including debt.
The all-cash transaction, which is expected to close this calendar year, will pay Nuance shareholders $56 per share, a 23% premium to Friday’s closing price. The deal is the second-largest for Microsoft, behind its $26 billion purchase of LinkedIn in 2016.
The acquisition will help Microsoft "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," said Microsoft CEO Satya Nadella.
Microsoft says Nuance's financials will be included as part of its Intelligent Cloud segment. The transaction is expected 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.
Goldman Sachs Group is acting as the exclusive financial adviser to Microsoft while Evercore is acting as financial adviser to Nuance.
The deal comes less than two weeks after the conclusion of a record quarter for global mergers and acquisitions activity.
Global M&A rose 114% year over year during the first quarter to a record $1.43 trillion, according to Dealogic. Deal activity is expected to remain strong in the months ahead.
"The Nuance deal is a strategic no brainer," wrote Wedbush analyst Dan Ives, adding that he expects Microsoft to be on the "M&A warpath over the next 12 to 18 months."