Cerner, a company based in Kansas City that makes medical software for hospitals and medical facilities, is acquiring the Siemens AG health information technology business unit for $1.3 billion in cash. The deal, which is planned to close in the first quarter of 2015, will add more than 15 cents to Cerner’s adjusted per-share profit in 2015 and more than 25 cents in 2016.
“We think scale is important,” says Neal Patterson. Patterson founded Cerner 35 years ago at his kitchen table, so he knows a little about scaling up. “We were the largest IT company, but this gets us a bigger, better business platform. We’ll have a combined $650 million [in research and development] spend and we think the future of healthcare computing is driven around the ability to innovate. This kind of preserves our ability to spend heavily in innovation and IT certainly for the rest of this decade.”
Cerner and Siemens Health Services have combined totals of more than 20,000 associates in more than 30 countries, 18,000 client facilities, $4.5 billion of annual revenue and $650 million of annual research and development investment, according to Cerner’s press release. The combination will bring Siemens’ expertise in medical imaging and devices together with Cerner’s leadership of health information technology.
Cerner is the fourth-leading supplier of electronic record systems to US hospitals, according to Software Advice consulting firm.
“We realized that business success of our hospital information systems could not always keep pace with our competition,” Hermann Requardt, the head of Siemens’s health-care operations, said in a statement. “An increasing number of country-specific requirements, such as resulting from US healthcare reform, make it increasingly challenging to achieve sufficient scale effects.”