Philips to Acquire 60% of MedQuist Inc. for $1.2 Billion in Growth Area for Philips Medical Systems

Business Wire, May 22, 2000

Business Editors

AMSTERDAM, Netherlands--(BUSINESS WIRE)--May 22, 2000

Royal Philips Electronics of the Netherlands (AEX: PHI, NYSE: PHG) and MedQuist Inc. (NASDAQ: MEDQ) of the United States, announced today that they have entered into an agreement whereby Philips will make a tender offer for approximately 60 percent of MedQuist's fully diluted common stock for a cash price of $51 per share. The transaction is subject to Philips acquiring 60 percent of the fully diluted shares of common stock of MedQuist, as well as the expiration of the Hart-Scott-Rodino waiting period and other customary conditions. It is expected that after completion of the transaction MedQuist's shares will continue to trade on NASDAQ under the symbol "MEDQ".

MedQuist Inc. is a US-based provider of outsourced medical record transcription services with sales of approximately $330 million in 1999. Philips' investment is intended to lead to the transformation of MedQuist into a multinational, technology-based medical document services provider over broadband networks. MedQuist plans to aggressively roll out Philips' speech and other technologies, enabling significant productivity improvements in the conversion of dictated medical records into written text.

Philips Medical Systems (PMS) is a global leader in diagnostic imaging systems and services, incorporating advanced x-ray, magnetic resonance, computed tomography, ultrasound and imaging information systems to provide the data necessary for the most effective patient care. MedQuist occupies a strong adjacent position in the hospital's information chain. For example, Radiology departments, where most of the imaging systems are used, are also some of the heaviest users of medical dictation services. Philips will now be able to offer its customers cost-saving software and services along with a full range of imaging systems.

"This acquisition moves us further into healthcare services, which is line with our stated strategy, and provides us with a significant growth opportunity, as well as leveraging our speech technology capability," said Cor Boonstra, CEO of Philips. "MedQuist has a market leadership position and a strong management team which enables it to become an effective early adopter of automated dictation. That will translate into more complete solutions for our medical customers. We have confidence in the current management team's ability to continue to drive the company forward."

David A. Cohen, MedQuist Chairman and Chief Executive said, "We are delighted to have Philips as our partner - the combination of our client base and their world-class technology and experience is extremely powerful. During the coming year we will utilize Philips technologies to begin the transition to our new digital transcription platform via regional data centers, providing us with additional growth opportunities, generating revenue and cost synergies, and enabling us to enter important new markets. With Philips as our technological partner and major shareholder, we are confident in our ability to undertake this important step in the future of our company."

Philips will also accelerate MedQuist's plans to expand into Europe, where Philips Medical Systems and Philips Speech Processing have strong existing hospital relationships. The two companies also plan to expand MedQuist's current range of outsourced transcription services to include in-house speech recognition software sales and Application Service Provider models.

As part of the transaction, MedQuist and Philips have also entered into a license agreement for the joint development and implementation of speech recognition technology. The more efficient use of MedQuist's transcription workforce, via the use of Philips Speech Processing's technology, and the recruitment of more widely available "editors", is anticipated to lead to even faster growth (already 20% per year on average), due to the fact that growth has been limited by the availability of qualified transcriptionists. Consequently, Philips and MedQuist do not expect any workforce reductions as a result of the speech technology rollout, which will take place between 2001 and 2005.

UBS Warburg LLC acted as financial advisor to MedQuist and Goldman Sachs International served as financial advisor to Royal Philips Electronics.

MedQuist is the leading U.S. provider of electronic medical transcription services, the process by which dictation is converted into a medical report. Through the company's nationwide network of more than 8,000 trained transcriptionists, broadband telecommunication systems and interface with health care providers' computer systems, MedQuist shortens its customers billing cycles and reduces overhead and other administrative costs. Additional information on MedQuist can be obtained by accessing its homepage at http://www.MedQuist.com

Philips Medical Systems is a leading supplier of diagnostic imaging systems and related services worldwide, represented in more than 100 countries and employing 11,800 people. A worldwide network of research and development and sales and service organizations backs Philips' products. Philips Medical Systems is part of Royal Philips Electronics, one of the world's largest electronics companies. Additional information on Philips Medical Systems can be obtained by accessing its homepage at http://www.medical.philips.com