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Nuance to Buy eScription


April 8, 2008

Nuance Communications will acquire transcription/dictation/speech recognition vendor eScription Inc. for cash and other considerations totaling $400 million.

The deal also includes private equity firm Warburg Pincus LLC of New York making a $100 million investment in Burlington, Mass.-based Nuance.

Nuance will pay $340 million in cash and $23 million in stock for eScription, plus assume vested employee options valued at $37 million.

The acquisition will augment Nuance’s existing dictation and transcription services for hospitals and other provider organizations. Needham, Mass.-based eScription, with revenue of $40 million in 2007, sells a Web-based, on-demand dictation application that includes speech recognition software. Physicians dictate their notes, which are automatically transcribed into text for a transcriptionist to edit. The application, called EditScript, has won a “Best in KLAS” award for four consecutive years, based on customer satisfaction scores, from vendor research firm KLAS Enterprises LLC, Orem, Utah.

Nuance expects $13 million to $15 million in revenue from eScription during the second half of fiscal 2008, which ends Sept. 30, and $56.5 million to $61.5 million in fiscal 2009. The acquisition, expected to close during Nuance's third quarter that ends on June 30, would result in a loss of 8 cents to 9 cents per share during the rest of fiscal 2008 and a loss of 15 cents to 16 cents in fiscal 2009. Excluding amortization, stock-based compensation and non-cash taxes, the acquisition would add to Nuance’s earnings during both years.

Both companies have complementary technology, but eScription has exceptional scripting and workflow software, says Bob Wise, president of the Dictaphone Healthcare division of Nuance. The companies will combine their technologies into a "super platform," he adds.

While Nuance primarily serves physician practices and mid-sized hospitals, eScription has targeted large hospitals and delivery systems, and has about 100 clients. The acquisition will enable Nuance to cross-sell to these clients its radiology dictation/transcription system, front-end Dragon speech recognition software for physicians, and the Veriphy software to send alerts to physicians of important test results.

Clients of eScription include Beth Israel Deaconess Medical Center in Boston; Carle Clinic in Urbana, Ill.; Health Alliance in Cincinnati; Maine Medical Center in Portland; Poudre Valley Health System in Fort Collins, Colo. and UNC Health Care System in Chapel Hill, N.C.

The acquisition is Nuance's largest, surpassing its $357 million buy of Dictaphone in 2006. Nuance’s stock price rose more than 6% in mid-day trading on April 8 after the acquisition was announced. More information is available at nuance.com and escription.com.

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