Microsoft is buying speech recognition company Nuance in a deal worth about 16 billion US dollars (£11.6 billion).

It will pay 56 dollars (£36.31) per share cash, a 23% premium on Nuance’s Friday closing price.

The companies value the transaction at 19.7 billion dollars (£14.3 billion), including debt.

Shares of Nuance surged about 23% in Monday pre-market trading.

Microsoft’s acquisition of Nuance comes after the companies formed a partnership in 2019.

The Redmond, Washington, company said the deal will double its total addressable market in the healthcare provider industry, bringing its total addressable market in healthcare to nearly 500 billion dollars (£363 billion).

Nuance’s products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all clinical speech recognition SaaS offerings built on Microsoft Azure.

The company’s products are currently used by more than 55% of physicians and 75% of radiologists in the US, and by 77% of US hospitals.

Its healthcare cloud revenue experienced 37% year-over-year growth in fiscal 2020.

“AI is technology’s most important priority, and healthcare is its most urgent application,” Microsoft chief executive Satya Nadella said in a statement.

Aside from healthcare, Nuance provides AI expertise and customer engagement solutions across interactive voice response, virtual assistants, and digital and biometric solutions to companies in all industries.

This will join with Microsoft’s cloud, including Azure, Teams, and Dynamics 365, to deliver next-generation customer engagement and security solutions.

The transaction is Microsoft’s second largest deal following its 26 billion dollar (£18.9 billion) purchase of LinkedIn in 2016.

Last September, it bought video game maker ZeniMax for 7.5 billion dollars (£5.4 billion).

“This is the right acquisition at the right time with Microsoft doubling down on its healthcare initiatives over the coming years,” Wedbush analyst Daniel Ives wrote in a note to clients.

Mr Ives said the transaction fits well into Microsoft’s healthcare portfolio and comes at a time that hospitals and doctors are embracing next-generation AI capabilities.

Mark Benjamin will continue as Nuance chief executive.

The transaction is expected to close this year.

It still needs approval from Nuance shareholders.