Cerner to buy Siemens health data unit for $1.3 billion

Cerner Corporation has signed a definitive agreement to acquire Siemens Health Services, the health information technology business unit of Siemens AG, for $1.3 billion in cash.

Based on 2014 estimates, the combined company will have $4.5 billion in annual revenue and have 18,000 client facilities, according to a statement released today by Kansas City, Mo.-based Cerner. An annual investment of $650 million will be put toward research and development.

Support for Siemens Health Services core platforms will remain in place, according to the announcement, with current implementations set to continue. Cerner plans to support the Soarian platform for at least the next decade.

"We believe this is an all-win situation for the clients of both organizations and all of our associates and shareholders," said Neal Patterson, Cerner chairman, CEO and co-founder.

"Siemens cares deeply about its clients and believes Cerner is the best organization to fully support their health IT needs going forward,” said John Glaser, PhD, CEO of the Health Services business unit of Siemens Healthcare. “The knowledge and strength of our combined resources opens up great possibilities for future collaboration and development, which is exciting for all of us.”

The healthcare division of Munich-based Siemens had the highest profit margin of the company’s four businesses in 2013, according to data compiled by Bloomberg. Despite its strong profitability, however, the healthcare unit was spun off earlier this year, when Siemens AG told investors that it would focus on three key business segments: electrification, automation, and digitalization. The health data unit is not the first business the company divested. Siemens AG divested eight businesses last year, the most of any European industrial company, according to Bloomberg Intelligence data.

In the case of the health data unit specifically, Herman Requardt, head of Siemens’ healthcare operations, said in a statement, “We realized that business success of our hospital information systems could not always keep pace with our competition. An increasing number of country-specific requirements, such as resulting from US healthcare reform, make it increasingly challenging to achieve sufficient scale effects.”