(Ralph Orlowski/Getty)

Cerner Corp. said on Tuesday it would buy the health information technology unit of German company Siemens AG for $1.3 billion in cash.

As part of the deal, Kansas City, Mo.-based Cerner, a medical records technology provider, and Malvern, Pa.-based Siemens Health Services would each contribute up to $50 million in joint funding on projects as part of a strategic alliance aimed at integrating health care information technology with medical technology to improve diagnostic and therapeutic processes and work flow in hospitals and medical research—a growing area of the health care industry.

The combined company would have an estimated $4.5 billion in annual revenues and $650 million in annual research and development investment. It would employ 20,000 associates in more than 30 countries and serve 18,000 client facilities, including large health care groups.

The transaction is being financed with cash and is expected to close in the first quarter of 2015, pending regulatory approvals. The boards of Cerner and Siemens already have approved the deal.

“We believe this is an all-win situation for the clients of both organizations and all of our associates and shareholders,” Cerner CEO Neal Patterson said in a statement. “The alliance we are creating will drive the next generation of innovations that embed information from the EMR (electronic medical records) inside advanced diagnostic and therapeutic technologies, benefiting our shared clients.”

Hermann Requardt, CEO of Siemens Healthcare, said that a changing regulatory landscape in the health care industry—including the Affordable Care Act in the United States—has made certain aspects of the industry more competitively challenging and that Siemens needs to redirect its focus.

“In the recent years, we have continuously invested in our HS portfolio and achieved significant progress on the technology side,” he said in a statement. “At the same time, we realized that business success of our hospital information systems could not always keep pace with our competition. Additionally, an increasing number of country-specific requirements, such as resulting from U.S. health care reform, make it increasingly challenging to achieve sufficient scale effects. Going forward we will focus on the development of information systems that support our businesses in laboratory diagnostics as well as imaging and therapy.”

Latham & Watkins advised Cerner Corp. on the transaction, while Clifford Chance advised Siemens AG.

Latham’s team was led by mergers and acquisition partners Jim Beaubien, Bradley Helms and Harald Selzner and counsel David Wheeler. The European M&A team included counsel Thies Deike, counsel Joachim Grittmann and partner Ignacio Pallares in Madrid.

Latham associates Natalie Daghles, Jana Dammann, Ignacio Dominguez, Caitlin Gibson, Julia Heydel, Milu Hoppenbrouwer, Jia Jia Huang, Stephan Kress, Maximilian Menges Aryeh Richmond, Marion Schuster and Benedikt Vogt also worked on the deal.

Clifford Chance’s team for Siemens was led by partners Nicole Englisch and Jan Wrede. Corporate counsel Matthias Wahl and corporate transaction lawyer Moritz Erdmann also worked on the transaction. Associate Wenzel Richter assisted.

Clifford Chance had previously advised Siemens on a 2.4 billion euro bond issue with Deutsche Bank and Barclays in September 2012, as well as the sale of TLT-Turbo GMbH to Power Construction Corporation of China in October 2013.

Crowell & Moring provided legal counsel to Siemens financial adviser JP Morgan, with antitrust counsel Olivier Antoine working on the deal.