Merge buys DR Systems for $70M

Merge Healthcare has announced that it has acquired DR Systems, the San Diego-based PACS vendor, in a deal worth $70 million.

Under the acquisition, which was finalized Feb. 25, the DR Systems name would be retired. DR Systems’ founder, chairman and CEO, Murray Reicher, MD, FACR, will assume the role of chief medical officer at Merge.

“With the addition of DR Systems, Merge has advanced to a leading market share position in the acute market and we have extended our lead in the ambulatory market,” said Justin Dearborn, chief executive officer of Merge Healthcare, during a quarterly earnings conference call on Feb. 26. Based on recent ratings from KLAS Research, the combined entities rank No. 1 in cardiovascular information systems, hemodynamics monitoring and radiology information systems.

Dearborn also stressed that vendor scale is a paramount concern as the imaging market evolves, particularly for the largest providers. “Consolidation within the provider community is driving their desire to reduce the number of vendors and we have seen large providers look to vendors with scale to form long-term relationships.”

The deal offers an opportunity for Merge to cross-sell services to each company’s installed base. Merge will be able to deploy its iConnect Network, including pre-authorization services, to a broader client base, and the company has said it plans to support and advance all DR Systems core product lines going forward.

Merge Healthcare financed the deal with approximately $20 million cash on hand and $50 million raised from the sale of shares of newly issued preferred stock, sold at $4.14 per share common equivalent calculated based on Merge's 30-day volume weighted average common stock price.