Nuance-Transcend deal hits speed bump; deadline extended

Nuance seeks to buy Transcend for $300 million in a bid to bolster its healthcare business, but the company is dragging its feet to close the deal.

Language giant Nuance Communications announced this morning an extension to its $300 million cash offer to buy transcription and editing company Transcend Services.

In March, Nuance offered a price of $29.50 per share, a 30 percent premium. The deadline was originally April 16; it has now been extended to 5:00 p.m. ET on April 25.

The reason? The "eScription Condition" in the March 20 Offer to Purchase document "had not yet been satisfied." (Nuance completed its acquisition of eScription in 2008.)

That condition requires Transcend to show that:

  1. At least one new or existing customer has used eScription ASR for at least one customer account for Transcend's BeyondTXT technology platform; and
  2. At least one new or existing customer has used eScription ASR for at least one customer account for Transcend's GEMSTAR technology platform.

It's unclear to me why Transcend is dragging its feet; it seems these requirements were included as a matter of good faith more than anything else. (Nuance CEO Paul Ricci first proposed to Transcend CEO Larry Gerdes in February that the deal would be subject to the condition that his company demonstrate its ability to migrate its customers onto Nuance's technology platform; the condition would be automatically satisfied within nine months of signing merger agreement paperwork.)

The way I'm reading this, Nuance's announcement is a way to put a bit of heat on Transcend's executive team to get in gear.

Nuance, which specializes in speech and related recognition technologies, sees Transcend as a natural fit to help it dig its heels deeper into the heathcare sector. Among Transcend's businesses: medical transcription services that allow physicians to pick up the phone and record, using their voice, notes about a patient, which are then included in that patient's electronic medical record.

In the company's own words:

With Transcend, Nuance will accelerate access to and expand its customer base within the small- to mid-size hospital market, which comprises approximately 90 percent of hospitals in the U.S. and increasingly demands cost effective, voice-enabled, clinical documentation solutions to achieve Meaningful Use and the transition to ICD-10. With Nuance’s voice-enabled and Clinical Language Understanding technologies and deep electronic health record (EHR) integration, combined with Transcend’s high-quality transcription and editing services, hospitals can make clinical documentation and workflow more productive and cost efficient and extract greater value from clinical information.

"The acquisition is a natural extension of Nuance’s existing healthcare business, and will strengthen our solution and services portfolio, as well as enhance our profitability," Nuance healthcare GM Janet Dillione said in March.

As I reported on our sister site SmartPlanet in November, Nuance already offers similar services, so the intent with this deal is less clear: is it a bid for Transcend's clients? Its intellectual property? Or is Nuance snapping up talent before a rival does?

For now, all that's on the ice while Nuance waits for its conditions to be satisfied. The penalty for letting the deal fall through is steep: $9.94 million.