Nuance Stock Rallies on Microsoft’s US$19.7B deal

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Nuance Stock Rallies on Microsoft’s US$19.7B deal

 Nuance Stock Rallies on Microsoft’s US$19.7B deal

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Summary

  • Microsoft will pay US$56 per Nuance share, which represents a 23 percent premium on Friday’s closing price.
  • The US$19.7 billion all-cash transaction, which includes debt, is expected to be completed in 2021.
  • Nuance’s CEO AMark Benjamin will continue in his role after the acquisition.

Stocks of artificial intelligence company Nuance Communications Inc. (NASDAQ: NUAN) shot up 15.95 percent on Monday after Microsoft Corp. (NASDAQ: MSFT) announced its plans to acquire it in US$19.7-billion all-cash deal, including debt.

The boards of both companies have green lit the deal and is likely to close by 2021-end, subject to Nuance’s shareholders and regulatory approvals and customary closing conditions.

The technology giant offered to pay US$56 per Nuance share, a premium of 23 percent to Nuance’s Friday closing price of US$48.58.

With this acquisition, Microsoft aims to double addressable market in healthcare to nearly US$500 billion. Nuance CEO AMark Benjamin will continue in his role and report to Microsoft’s Cloud & AI Executive Vice President Scott Guthrie following the acquisition.

This will be Microsoft’s second-largest acquisition. In 2016, it paid US$26.2 billion for LinkedIn. Microsoft is also reportedly in talks to buy San Francisco-based messaging platform Discord Inc. in a deal that could value the startup at US$10 billion or more.

Nuance’s share price soared 147 percent in 2020 while Microsoft saw share price grew over 38 percent.

Source: Refinitiv, Share performance of Nuance, Microsoft on Nasdaq in 2020.

What Does Nuance Do?

The Massachusetts-based company provides AI and cloud-based solutions to healthcare providers. The company also offers AI-powered intelligent customer engagement solutions and services to enterprises and contact centers.

Nuance solutions and products are used by over 55 percent physicians and 75 percent radiologists as well as 77 percent of hospitals in the U.S.

Nuance previously provided voice analysis technology for Apple Inc.’s virtual assistant Siri and have been collaborating with Microsoft on ambient clinical intelligence technologies since 2019.

For the fiscal year 2020 ended Sept. 30, the company reported US$ 1.48 billion in total revenue, down from US$1.52 billion in fiscal 2019 amid the adverse impacts of the coronavirus pandemic.

Healthcare segment revenues was US$915.3 million while enterprise segment revenues totaled US$530 million. It represents 61.9 percent of the company’s total revenue during the year.

Meanwhile, Nuance’s total revenue fell to US$345.8 million during the fiscal first quarter of 2021 (ended Dec. 31) from US$36.5 million in the year-ago period.

However, Nuance’s revenue from healthcare cloud services jumped 37 percent year over year in fiscal year 2020 while it grew 28 percent in the first quarter of fiscal 2021.

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