Royal Philips Electronics announced on Thursday that it has reached an agreement to sell its approximate 69.5 per cent ownership interest in medical transcription company MedQuist Inc. to CBay Systems Holdings for $11.00 per share, or approximately $285 million.

The acquisition is expected to close during the third quarter and is conditional upon applicable regulatory approvals, approval by CBay shareholders at a general meeting of shareholders, and the fulfillment of specific closing conditions.

The purchase price represents a premium of 47 per cent over the most recent trading price of MedQuist's stock, before it was delisted in 2004 after US authorities launched an investigation into whether it had violated laws in connection with the provision of medical transcription services. It has since paid damages to settle several lawsuits against it.

These included suits related to charges it overcharged hospitals for transcription services and a case brought by shareholders who accused it of issuing misleading information that inflated the stock price.

This purchase will complement CBay Systems Holdings' existing portfolio of businesses in medical transcription, healthcare technology, and healthcare financial services, including CBay Systems & Services Inc, CBay Systems Private Ltd. and Mirrus Systems.

CBay will pay Philips in cash and a promissory note equivalent to about $7.50 per share. The remaining $3.50 per share will be paid in the form of a seven-year bond convertible into common stock of CBay, Philips said.

Philips had earlier paid $1.2 billion for a stake of about 60 per cent in MedQuist in 2000, and later increased its holding to almost 70 percent. It said the impact of the sale should be immaterial and would be booked under discontinued operations in its third-quarter results.

Philips said last July it was reviewing its options for its MedQuist stake after deciding it was a non-core holding and took a 35 million euro impairment charge on its stake.

In November, it said it wanted to proceed with a sale and took a fourth-quarter charge of €320 million to take account of the decline in the book value of the asset due to the fall in the dollar since it bought MedQuist in 2000.

MedQuist said in a statement CBay - also a major provider of medical transcription and healthcare technologies in the United States - had confirmed it would continue to operate as an independent company.

"Now that the sale evaluation process is concluded, we can focus all of our energy and talent on growing top line revenue and bottom line performance," MedQuist CEO Howard Hoffmann said.