By Michael Dabaie

Nuance Communications Inc. shares were up 17% to $53.24 in morning trading.

Microsoft Corp. before the market open said it would acquire cloud and AI software company Nuance Communications for $56 a share, implying a 23% premium to Nuance's $45.58 closing price Friday.

Microsoft said the all-cash transaction is valued at $19.7 billion, including Nuance's net debt.

The acquisition will double Microsoft's total addressable market in the healthcare provider space, bringing the company's TAM in healthcare to nearly $500 billion, Microsoft said.

Microsoft's acquisition of Nuance builds upon the existing partnership between the companies that was announced in 2019.

For Microsoft, "this is the right acquisition at the right time with Microsoft doubling down on its healthcare initiatives over the coming years. The Nuance deal is a strategic no brainer in our opinion for MSFT and fits like a glove into its healthcare endeavors at a time in which hospitals and doctors are embracing next generation AI capabilities from thought leaders such as Nuance," Wedbush said in an analyst note.

"Clearly, [Microsoft] is on the 'offensive' around M&A with the company in a clear position of strength to capitalize on its entrenched position in the cloud going forward with Nuance another feather in its cap," Wedbush said.

"While the price tag may seem hefty in comparison to many of Microsoft's past acquisitions, we believe the post-acquisition transition can be done seamlessly given how close the companies have become through ambient clinical intelligence," Stifel said in a note issued before Microsoft confirmed the deal.

Write to Michael Dabaie at michael.dabaie@wsj.com

(END) Dow Jones Newswires

April 12, 2021 10:40 ET (14:40 GMT)

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