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Acquisition Expected to Speed Development of a Continuous Dictation Offering
by Approximately six months, Strengthen L&H's Worldwide Market Position
SAN FRANCISCO, April 15 /PRNewswire/ -- Moving further toward its goal to enhance its market position in the speech arena, Lernout & Hauspie Speech Products (Nasdaq: LHSPF) announced today that it has signed a definitive agreement to acquire Kurzweil Applied Intelligence, Inc. (Nasdaq: KURZ). Both companies develop technologies and products that allow personal computers and other devices to recognize spoken words and convert them into text or automatically perform operations. As a result of this acquisition, Lernout & Hauspie (L&H) will combine its efforts with those of Kurzweil AI to develop a large vocabulary, speaker-independent, continuous dictation engine. L&H believes the combined efforts will help accelerate its introduction of continuous speech dictation products by approximately six months.
According to L&H the acquisition should enable it to develop products that other speech companies have been unable to provide to date, among them a technologically superior speaker-independent continuous dictation engine, built "from the ground up." The acquisition will also augment L&H's strong international presence with a broad base of U.S. customers and will significantly expand its current sales channels.
L&H will acquire Kurzweil AI for approximately $53M U.S. in a purchase transaction. The company believes it has and can obtain sufficient financial reserves to cover this acquisition as well as to execute the integration plans. Eighty percent of the purchase price will be paid in cash and 20 percent in newly issued shares of L&H common stock. The acquisition is expected to be non-dilutive to L&H's earnings per share in 1997, and to be accretive in 1998. The transaction is expected to be completed within a few months, following a filing with the Securities and Exchange Commission and approval by Kurzweil AI stockholders.
L&H is currently negotiating with the Dictation Consortium for their participation in the acquisition in order for them to benefit from this accelerated product development. Under the terms of the revised arrangement being discussed, the Dictation Consortium will pay up to $26M to L&H out of the additional income that is anticipated to be generated from forthcoming products in 1998 and thereafter as a result of the acquisition. The Dictation Consortium is a Flanders Language Valley Foundation investment dedicated to the development of continuous automated speech recognition.
This acquisition should not only accelerate L&H's market introduction of a speaker-independent, continuous dictation engine but it should also increase the revenues of L&H's continuous dictation products.
"We see significant synergy between the L&H and Kurzweil AI continuous dictation development efforts," said Gaston Bastiaens, president of L&H. "As a result of this acquisition we believe L&H will enhance its already strong market position and be able to take advantage of the expected growth in voice- enabled PC computing on a worldwide basis. The combined efforts of the two companies should lead to an expanded research and development effort and, leveraging L&H's significant multi-national experience, create a company with strong, diverse multi-lingual products for a well-established international customer base."
Tom Brew, president and CEO of Kurzweil AI added, "Kurzweil AI is in the final stage of an extensive business transition. Both our medical software and PC applications groups are benefiting from new products that were introduced during the past 12 months. We expect this acquisition will accelerate the development of our new continuous dictation technology, and create additional opportunities for us to reach a worldwide market with our product offerings."
Kurzweil AI is a leader in the voice-enabled medical reporting field, providing software that healthcare professionals use to dictate notes and create reports. Its voice-enabled clinical reporting systems, VoiceMED(TM) and Kurzweil Clinical Reporter(TM) are used in more than 500 healthcare institutions throughout the U.S. In addition, the company has introduced Kurzweil Voice(TM), an easy-to-use voice recognition system for Windows-based PCs, and Kurzweil VoicePad(TM), a voice-enabled word processing application. Both Kurzweil Voice and Kurzweil VoicePad are widely distributed through the PC retail channel in North America.
"This acquisition is good news for Lernout & Hauspie, Kurzweil AI, and the speech industry," said speech industry analyst John Oberteuffer of Voice Information Associates, Inc. "The combined companies will benefit the rapidly growing speech technologies industry by creating a stronger competitor to the other major speech recognition providers in the dictation market."
Both L&H and Kurzweil AI have been developing technology for continuous speech dictation. L&H has been building a dictation engine for continuous speech in a variety of languages as part of its development and commercialization agreement with the Dictation Consortium. The further development of this continuous dictation engine should serve as the foundation for a variety of end-user applications in both vertical and horizontal markets.
Tom Brew, president and CEO of Kurzweil AI, is expected to leave to pursue other business opportunities once the acquisition is completed, but will remain available to L&H on a consulting basis. In a related move, L&H named Koen Bouwers, corporate senior vice president of L&H and president of L&H's dictation division. Bouwers will be responsible for the integration and management of the combined activities. Bouwers has an extensive track record as an international marketer and business manager, having served as general manager of Philips Dictation Speech Products in the USA.
"As a result of the acquisition, L&H is now poised to seize a leadership position in the worldwide dictation market," Bouwers said. "In addition to providing L&H with leading products in the medical software and PC applications markets, Kurzweil's strengths complement L&H's in a number of ways. L&H is a speech technology leader internationally, while Kurzweil AI is very strong in North America. And, L&H has established a strong original equipment manufacturer (OEM) channel, while Kurzweil AI has established solid US retail and US medical direct sales channels."
In 1996 L&H reported total revenue of $31 million, an increase of 400 percent over fiscal year 1995. L&H currently has more than 400 employees worldwide; Kurzweil AI has 110. L&H plans to retain Kurzweil AI's research and development staff, and anticipates staff and costs reduction in both companies only in areas where there is redundancy.
About Kurzweil AI
Kurzweil AI, headquartered in Waltham, Mass. was founded in 1982. The company develops, markets and supports automated speech recognition software used to create documents and interact with computers by voice. Kurzweil Voice is an easy-to-use voice recognition system for Windows-based PCs, and Kurzweil VoicePad is a voice-enabled word processing applications. The company's medical reporting systems, VoiceMED and Kurzweil Clinical Reporter, are used in more than 500 healthcare institutions nationwide.
About Lernout & Hauspie
Lernout & Hauspie Speech Products (L&H) is an international leader in the development of advanced speech technology for various commercial applications and products. Its three core technologies, automatic speech recognition, text-to-speech and digital speech compression, are licensed to some of the world's best-known companies in the telecommunications, computers and multimedia, consumer electronics and automotive electronics industries. A recipient of Byte magazine's Best Technology award at CeBIT 97, L&H offers its full range of speech technologies on multiple platforms in multiple languages. In addition, it offers translation services to information technology (IT) companies, as well as vertical and automation markets.
The company has its worldwide headquarters in Ieper, Belgium, its U S. headquarters in Burlington, Massachusetts and international sales offices throughout Asia. Lernout & Hauspie became a public company in 1995 and is traded on Nasdaq under the symbol LHSPF.
This news release contains forward looking information that involves risks and uncertainties, including statements about the Company's plans, objectives, expectations and intentions. Such statements include, without limitation, discussions concerning (i) the ability of the Company to develop dictation products within the time frame and with the capabilities set forth in this release and to market those products successfully once developed, and (ii) the ability of the Company to integrate Kurzweil's business and operations successfully, such that the acquisition will be first non-dilutive and then accretive to the Company's earnings per share. Investors are cautioned that such forward looking statements involve risks and uncertainties, including without limitation, the risk that the Company will not be able to develop products on a timely basis, and within budget, if at all, that any products once developed will not meet the performance goals sought by the Company, and that even if such goals are met that any such products will be commercially successful. The Company's ability to effectively integrate and operate Kurzweil's is subject to many risks and uncertainties that may cause the actual results, performance or achievements of Lernout & Hauspie to be materially different from any future results, performance or achievements express or implied by such forward looking statements. Moreover, the consummation of the purchase of Kurzweil is subject to certain customary conditions, including approval of Kurzweil's stockholders, and there can be no assurance that these conditions will be satisfied and that the acquisition will proceed on a timely basis, if at all. The forward looking statements contained herein speak only as of the date of this news release.
The Company expressly disclaims any obligation of undertaking to release publicly in the updates or revisions to any such statement to reflect any change in the Company's expectations or any change in events, conditions or circumstance on which any such statement is based. For further information, refer to the risk factors detailed from time to time in the Company's filings with the Securities and Exchange Commission.
Lernout & Hauspie can be found on the World Wide Web at www.lhs.com. Kurzweil AI can be found on the World Wide Web at www.kurzweil.com.
All product names and trademarks mentioned herein are trademarks of their respective companies.
A version of Kurzweil VoicePad, Kurzweil AI's voice-enabled word processing application can be downloaded from the company's Web site for use during a brief evaluation period.
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