By Chelsey Dulaney
International Business Machines Corp. added to its Watson Health
platform Thursday by agreeing to buy Merge Healthcare Inc. in a
cash deal that gives the medical image company an equity value of
about $700 million.
The offer of $7.13 a share is a 32% premium to Merge's closing
price of $5.41 a share on Wednesday. Based on Merge's 98.9 million
shares outstanding as of July 28, the deal is valued at $705
million.
IBM valued the deal at $1 billion, a figure that includes debt,
preferred stock, among other things.
Merge provides medical image handling and processing to clinical
research institutes, pharmaceutical firms and health-care sites.
Shares of Merge Healthcare rose 31% to $7.09 in morning trading,
while IBM added 30 cents to $156.90.
Through the combination, IBM is hoping Merge's clients will be
able to use Watson's health platform to see historical images,
electronic health records and data from wearable devices. IBM sees
the platform resulting in more personalized approaches to diagnosis
and monitoring in fields such as radiology, cardiology and
orthopedics.
In the first six months of 2015, Merge reported earnings of
$19.7 million on sales of $120 million.
The deal, subject to regulatory approval, is expected to close
later this year.
Through Watson Health, which the company launched in April, IBM
is aiming to increase its handling of health-related data.
In April, IBM unveiled a partnership with Apple Inc., Johnson
& Johnson and Medtronic Inc., as well as the acquisition of two
medical-data software companies.
IBM is hoping to transfer its experience in data processing to
the sensitive field of health care, part of an evolving strategy to
pool and analyze data from other companies, such as Twitter Inc.
and the Weather Channel.
The Watson Health project reflects a growing view among
technology vendors and medical providers that patient information
which could yield valuable insights--and business opportunities--is
locked up in proprietary silos.
Such insights are increasingly valuable as the payment approach
in health care shifts toward rewarding favorable health outcomes
rather than services rendered. Watson Health is attempting to
marshal huge amounts of scrambled and aggregated patient data in
the service of providing individualized health care that might
improve outcomes and cut costs.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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