IBM Buying Truven for $2.6 Billion to Amass More Health Data

  • Fourth health data-related acquisition in less than a year
  • IBM's biggest purchase in three years under CEO Ginni Rometty

IBM has agreed to buy Truven Health Analytics for $2.6 billion, its fourth acquisition in less than a year aimed at expanding in the business of combing through health-related data. The shares rose the most in 4 1/2 years.

More than 8,500 hospitals, insurers and government agencies use Truven to manage and analyze the reams of data generated by the health industry. Veritas Capital, a New York-based private equity firm, bought Truven in 2012 for $1.3 billion, according to company filings. The deal is expected to be completed later this year.

The acquisition of Ann Arbor, Michigan-based Truven will be International Business Machines Corp.’s biggest purchase in the three years under Chief Executive Officer Ginni Rometty. IBM has invested heavily in data and technology to improve its products and services for the health-care industry, centered on its Watson Health business unit. Watson is IBM’s collection of artificial-intelligence technologies used to interpret, analyze and predict data patterns. Adding more information from businesses like Truven will help IBM’s software work better and can provide more useful insights.

“Most of the data in health-care is in disparate databases,” Deborah DiSanzo, general manager at IBM Watson Health, said in an interview. “The strategy of IBM is to bring this data together and democratize it so that both IBM and our ecosystem of partners can build health solutions on top of it.”

Veritas Capital, which invested about $470 million of equity when it bought Truven, will make roughly a 250 percent gain, a person familiar with the matter said. Andrew Cole, a Veritas spokesman at Sard Verbinnen & Co., declined to comment on the firm’s profit. Schulte Roth & Zabel LLP advised Veritas and Truven on the sale.

IBM rose 5 percent to $132.45 at the close in New York, the biggest single-day jump since July 2011. The stock has declined 3.8 percent this year.

The success of Watson -- which Rometty has called her moonshot -- is integral to IBM’s future as the company struggles to reverse sales declines for the past 15 consecutive quarters. The Armonk, New York-based company last year bought Merge Healthcare for $1 billion to gain medical-imaging data and technology. IBM also acquired health-care big data analytics provider Explorys and population health technology seller Phytel.

After integrating Truven’s data from about 215 million individuals, IBM will have amassed various kinds of health-related information from 300 million patients, the company said. IBM intends to use the data from Truven, Merge Healthcare, Explorys and Phytel to focus on creating insights into value-based care, which the U.S. has been shifting toward and allows patients to pay for health-care based on outcomes.

All areas in health-care are “converging around value-based health-care delivery,” Truven CEO Mike Boswood said in an interview. “As part of Watson Health, we will be able to far more effectively contribute to how those changes are implemented.”