Cerner announced Tuesday afternoon it will acquire Siemens' health IT division for $1.3 billion.
Here are 10 things to know about the deal:
- The transaction is expected to close during the first quarter of 2015, pending regulatory approval. Cerner will finance the deal with cash on hand.
- The deal is expected to significantly boost Cerner's profits. Cerner expects the deal to raise annual sales to $4.5 billion in 2015, up from about $3 billion in 2013.
- According to The Wall Street Journal, the deal is likely to add about $0.15 per share to the company’s adjusted profit in 2015 and more than $0.26 per share in 2016.
- After the deal closes, Cerner will have about 20,000 employees across more than 30 countries and 18,000 facilities as clients, according to a Forbes report.
- The acquisition will allow Cerner to offer more comprehensive solutions. "Siemens' expertise in imaging IT and laboratory management will add value to Cerner's EHR and PAS portfolio. The Soarian RCM platform from Siemens will also provide Cerner with the opportunity to strengthen its contribution in the revenue cycle management segment," says Frost & Sullivan Healthcare IT Research Analyst Shruthi Parakkal. "This acquisition is not just an organic business development route for Cerner, but has to be seen as a stepping stone supporting its strategy of positioning itself as an end-to-end player in the evolving healthcare IT markets globally."
- Part of the acquisition agreement is the formation of a strategic alliance between the companies to use their respective strengths, Cerner's health IT expertise and Siemens' medical device and advanced imaging capabilities, to develop new products and solutions. The two companies currently have a combined annual R&D investment of about $650 million, and each company will invest up to $50 million more toward jointly developing new products.
- Cerner will continue to support Siemens products, including its EHR platform. Siemens currently has a small but not insignificant share of the hospital EHR market. According to recent CMS data, 81 hospitals have used Siemens software to attest to meaningful use.
- The health IT division was the most profitable of Siemens' four main divisions in 2013. However, Siemens CEO Joe Kaeser had been looking to separate Siemens Health Services from the rest of the company and focus Siemens on its energy and industrial businesses.
- Siemens Health Services has also had recent trouble keeping up with both competitors and new healthcare regulations, said Hermann Requardt, CEO of Siemens's healthcare division, according to a Reuters report. "[An] increasing number of country-specific requirements, such as (those) resulting from U.S. healthcare reform, make it increasingly challenging to achieve sufficient scale effects," he said.
- Siemens Health Services is not the only health-related Siemens business to be sold recently. The company's clinical microbiology business has been sold to Beckman Coulter, part of Danaher Corp, according to a Bloomberg report. That deal is also expected to close during the first quarter of 2015.
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Cerner to acquire Siemens Health Services for $1.3B