Microsoft announced today that it will acquire AI software maker Nuance in an all-cash deal valued at $19.7 billion. That price represents a 23 percent premium to the closing price of Nuance’s shares at the close of business on Friday.

“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” Microsoft CEO Satya Nadella said of the acquisition. “AI is technology’s most important priority, and healthcare is its most urgent application. Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate [the] growth of Microsoft Cloud for Healthcare and Nuance.”

Microsoft and Nuance previously unveiled a strategic partnership in 2019, with the firms pledging to work together to combine Nuance Dragon Medical with Microsoft’s Azure, Azure AI, and ProjectEmpowerMD. Nuance integrated its Ambient eXperience ACI (ambient clinical intelligence) solution with Microsoft Teams in late 2020.

“Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions,” Nuance CEO Mark Benjamin says. “To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable[,] and effective connections to people and care. The path forward is clearly with Microsoft, [which] brings intelligent cloud-based services at scale and who shares our passion for the ways technology can make a difference. At the same time, this combination offers a critical opportunity to deliver meaningful and certain value to our shareholders who have driven and supported us on this journey.”

Under the terms of the deal, Mr. Benjamin will remain CEO of Nuance, and will now report to Microsoft executive vice president Scott Guthrie. Microsoft expects Nuance’s financials to be reported as part of its Intelligent Cloud business segment, and the software giant expects to close the transaction during this calendar year.