ScanSoft to Buy SpeechWorks

The speech software vendors will merge, with Scansoft to buy all the outstanding common stock of SpeechWorks.

Speech software vendors ScanSoft Inc. and SpeechWorks International Inc. announced Thursday that they will merge, with Scansoft to buy all the outstanding common stock of SpeechWorks.

The deal calls for ScanSoft to issue 32.6 million shares of its common stock to SpeechWorks shareholders, who will receive .86 shares of ScanSoft stock for every SpeechWorks share they hold. Less SpeechWorks $49 million cash balance, the deal is valued at $115 million as of Thursdays market close.

The companies are expected to combine their technologies and resources, while shedding approximately $27 million in overhead costs, mostly through headcount reductions.

Both companies develop speech recognition and text-to-speech products. Peabody, Mass.-based ScanSoft also develops imaging software, while SpeechWorks, in Boston, adds speaker verification software.

"The combined organization gives ScanSoft the resources to lead the speech industry with a diverse and proven set of assets," said Paul Ricci, chairman and CEO of ScanSoft, in a statement. "With this transaction, ScanSofts innovative technologies and solutions, broad channels, professional services expertise, strong management and talented employees will allow us to accelerate the development and adoption of innovative speech-enabled applications and services worldwide."

"SpeechWorks is committed to the proliferation of speech solutions on a global scale, and we believe this transaction brings value to the entire industry," offered Stuart Patterson, CEO of SpeechWorks. "We look forward to combining our resources with ScanSoft. Our collective strengths and expertise, combined with our global network of partners, will allow us to provide enterprise and carrier customers around the world with even more powerful and efficient speech solutions that generate new revenues, reduce costs and enhance customer satisfaction."

When the transaction closes, expected by Aug. 1, Patterson will become president of ScanSoft, replacing president and chief operating officer Michael Tivnan, who is retiring. Ricci will remain chairman and CEO of ScanSoft.