IBM Adds to Its Watson Health Service

International Business Machines Corp. said Thursday that it agreed to buy Merge Healthcare Inc. for about $700 million in cash, as it continues to build its Watson Health platform it launched in April.

The offer of $7.13 a share is a 32% premium to Merge's closing price of $5.41 a share on Wednesday. IBM says the deal values Merge at $1 billion, a figure that likely includes debt.

Merge provides medical image handling and processing to clinical research institutes, pharmaceutical firms and health-care sites.

Through the combination, IBM is hoping Merge's clients will be able to use Watson's health platform to see historical images, electronic health records and data from wearable devices. IBM sees the platform resulting in more personalized approaches to diagnosis and monitoring in fields such as radiology, cardiology and orthopedics.

The deal, subject to regulatory approval, is expected to close later this year.

Through Watson Health, IBM has been working to position itself as a large broker of health-related data.

In April, IBM unveiled a partnership with Apple Inc., Johnson & Johnson and Medtronic Inc., as well as the acquisition of two medical-data software companies.

IBM is hoping to transfer its experience in data processing to the sensitive field of health care, part of an evolving strategy to pool and analyze data from other companies, such as Twitter Inc. and the Weather Channel.

The Watson Health project reflects a growing view among technology vendors and medical providers that patient information which could yield valuable insights—and business opportunities—is locked up in proprietary silos.

Such insights are increasingly valuable as the payment approach in health care shifts toward rewarding favorable health outcomes rather than services rendered. Watson Health is attempting to marshal huge amounts of scrambled and aggregated patient data in the service of providing individualized health care that might improve outcomes and cut costs.

Write to Chelsey Dulaney at [e-mail]

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