German technology company Siemens AG said it will acquire US healthcare software and services vendor Shared Medical Systems (SMS) for $2.1bn (£1.3bn).

Siemens said it offered SMS $73 a share, topping the $67 a share hostile bid made by Eclipsys in March. SMS's board recommended shareholders to accept the offer, and the deal is expected to be completed by the end of next month, pending regulatory approval.

Erich Reinhardt, president of Siemens AG's medical engineering group, said: "Combining Siemens' innovative technology and knowhow with SMS's advanced information systems will enable us to generate greater efficiencies for healthcare providers around the world."

Siemens said the acquisition would increase its access to the US healthcare software market, which it expects to grow about 10 per cent every year.

SMS has some 7600 employees and reported revenue of $1.2bn last year. But the company said that its first quarter revenue and profit dropped sharply compared with the same period last year. First quarter profit fell from $18.3m a year ago to $2.7m, while revenue dropped from $287.1m to $240.6m.

Marvin Cadwell, president and chief executive of SMS, said the first quarter results were hurt "by an industry-wide weakness in new software sales and a slower than anticipated return in the demand for large systems implementations following Year 2000".

Daren Marhula, an analyst at researcher US Bancorp, said SMS's fundamental business in struggling. "Siemens was its white knight," he said.

SMS will be integrated into Siemens medical engineering group, which makes X-ray equipment and diagnostic systems. The Siemens subsidiary employs 19,000 people and had sales of $4.3bn last year.