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IBM buying Merge Healthcare in $1 billion deal

Merge Healthcare, the Chicago-based medical imaging and technology company, is being bought by IBM in a deal valued at $1 billion.

Watson is IBM’s effort at advanced image analytics, data repackaging and interpretation. The combination of the Watson Health Cloud and Merge’s imaging technologies is intended to strengthen the ability to provide “historical images, electronic health records and data from wearable devices” in an enhanced tracking effort for health care providers, according to the news release announcing the deal.

“It’s a great affirmation of the innovation and creativity coming out of the Chicago market,” IBM Watson Vice President Stephen Gold said in an interview Thursday. “Truly what impressed IBM was not only the intellectual property associated with the services [Merge] provide, but the talent of the individuals that represent the organization.”

Merge has about 70 employees in the Chicago area, and Gold said the region will become IBM’s hub for “imaging and image analytics.”

Asked if the acquisition could mean more jobs coming to the area, he said, “It’s certainly possible.”

“As a proven leader in delivering health care solutions for over 20 years, Merge is a tremendous addition to the Watson Health platform. Health care will be one of IBM’s biggest growth areas over the next 10 years, which is why we are making a major investment to drive industry transformation and to facilitate a higher quality of care,” said John Kelly, senior vice president, IBM Research and Solutions Portfolio.

Under the terms of the deal, Merge shareholders would receive $7.13 per share in cash. If the deal is approved as expected late this year, it would be IBM’s third major health-related acquisition since the company launched its Watson Health unit earlier in 2015, according to the news release.

“We put together a team of talented people from Chicago and the Midwest who built a great company which will be the critical foundation for IBM and Watson building the largest health care technology company in the world,” said Michael W. Ferro Jr., Merge’s chairman. “This company will help people around the world live healthier, better lives. It’s a shining example of what Chicago’s tech innovators can accomplish.”

Ferro also is chairman of the board for Wrapports LLC, the parent company of the Chicago Sun-Times.

Merge’s technology platforms are used at about 7,500 U.S. health care sites and at most of the world’s leading clinical research institutes and pharmaceutical firms, according to the news release. It topped second-quarter earnings estimates announced in July with a reported net income of $2 million, or a penny per share, compared with a $4 million loss a year earlier.

Merge’s shares climbed 31 percent to $7.10. IBM’s stock fell 1 percent to $156.32.