IBM plans to combine data and images from Merge Healthcare's medical imaging management platform with Watson's cloud-based healthcare computing system.
The system analyses high volumes of data, understands complex questions posed in natural language and proposes evidence-based answers.
The deal will help physicians and researchers collate and analyse data such as patient's medical and family history, data on others with similar symptoms and clinical research, trials and outcomes.
"Imaging is central to effective diagnosis and treatment ... but it is increasingly important to share these images between providers to deliver high quality, cost-effective care," Dougherty and Co analyst Brooks O'Neil wrote in a note.
IBM has been expanding aggressively in the healthcare IT sector. The Merge deal is the company's third major health-related acquisition since launching the Watson Health unit in April.
"Organically, we will continue to build and invest from a research perspective in core technologies," said Stephen Gold, vice president, IBM Watson.
"We will compliment and supplement that with acquisitions," Gold told Reuters.
With this acquisition IBM will get access 7,500 U.S. healthcare sites.
Merge Healthcare shareholders will get $7.13 per share at a premium of 31.8 percent to Wednesday's close, the companies said.
Merge shares were trading at $7.08 by afternoon. IBM shares were little changed at $156.33.
The equity portion of the offer is valued at $713.1 million (roughly Rs. 4,545 crores), according to Reuters calculations based on 100 million Merge Healthcare shares outstanding as of June 30.
© Thomson Reuters 2015
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