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ScanSoft Buying Nuance in Phone-Tree Merger

The companies agree to a $221 million deal, and Warburg Pincus takes a $75 million stake.
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ScanSoft

(SSFT)

agreed to acquire

Nuance

(NUAN) - Get Report

in a $221 million phone-tree merger.

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Peabody, Mass.-based ScanSoft will fork over an 80% premium over Monday's closing prices in the cash-and-stock deal. But it will get nearly $100 million in Nuance cash once it closes, which is expected in September.

ScanSoft expects combined revenue to exceed $315 million for fiscal 2006, and says the transaction will be accretive to ScanSoft shareholders for that year.

Holders of Menlo Park, Calif.-based Nuance will get 0.77 ScanSoft share and $2.20 in cash for each share they hold.

ScanSoft said it also signed up for a $75 million investment from Warburg Pincus, at Thursday's closing price of $4.24 a share, and up to $20 million in four-year warrants at $5 a share.

ScanSoft CEO Paul Ricci will head the combined company, but the firm will take the Nuance name because the "Nuance brand is widely respected in the speech market and is inclusive enough to serve as an identity for the combined company's entire product line," ScanSoft's press release indicates.

ScanSoft also posted a second-quarter loss of a penny a share on revenue of $53 million. Excluding certain costs, latest-quarter earnings were 2 cents a share, a penny ahead of the Thomson First Call estimate. For its part, Nuance posted a 13-cent loss on revenue of $11.8 million. Those figures fell short of the Wall Street analyst consensus estimate.

Shares of both companies were halted late Monday. Beforehand, ScanSoft rose 7 cents to $4.53 and Nuance rose a nickel to $3.10.