IT services major Cognizant Technology Solutions Corp has signed a definitive agreement to acquire the US-based privately held healthcare IT services provider TriZetto Corp for $2.7 billion. Cognizant would fund the deal through a mix of cash and debt and has received $1 billion in financing to support the transaction, it said in a press release.
Private equity firm Apax Partners had acquired TriZetto for around $1.4 billion, including consideration for stock options and shares related to its outstanding convertible notes, in 2008 and took it private. It was reportedly in talks to sell it for around $3 billion including debt.
The deal is expected to be completed in the fourth quarter of 2014, subject to customary closing conditions and purchase price adjustments including, without limitation, adjustments for items such as cash, indebtedness and working capital.
The acquisition is expected to help Cognizant accelerate significantly its market position and strategy of delivering innovative healthcare software and solutions to a wide range of healthcare clients. At present, healthcare segment contributes about 26 percent of Cognizant’s revenue.
“We are excited that the integrated portfolio of capabilities across technology and operations will uniquely position us to help clients drive higher levels of operational efficiency, while re-imagining care for the future,” Francisco D’Souza, CEO of Cognizant, said in the release.
Following the acquisition, TriZetto and its 3,700 employees will become a part of Cognizant’s existing healthcare business, which currently serves more than 200 clients, including 16 of the top 20 US health plans and four of the top five pharmacy benefit management companies.
“This acquisition is a natural fit for us. It represents a great opportunity to integrate services across our three horizons—traditional IT services; high-growth businesses such as management consulting, business process services and IT infrastructure services; and emerging delivery models—and provide even greater value to our clients,” Gordon Coburn, president of Cognizant, said.
TriZetto Corp provides IT services and solutions that help payers and providers work more efficiently and collaborate to deliver better health.
“The transaction is expected to be immediately accretive to Cognizant’s non-GAAP EPS, excluding one-time transaction costs and adjustments,” said Karen McLoughlin, CFO of Cognizant.
Credit Suisse, UBS Securities LLC and Centerview Partners advised Cognizant on the deal, while legal counsel was provided by Latham & Watkins LLP and Nishith Desai Associates.
TriZetto was advised by JP Morgan Securities LLC and Goldman, Sachs & Co. Legal counsel to TriZetto was provided by Kirkland & Ellis LLP.
Headquartered in Teaneck, New Jersey (the US), Cognizant provides IT consulting and technology services, as well as outsourcing services in North America, Europe and Asia. It has over 50 delivery centres worldwide and approximately 171,400 employees as of December 31, 2013.
Earlier in April this year, Cognizant agreed to acquire itaas, a digital video solutions company headquartered in Atlanta, Georgia, for an undisclosed amount.
(Edited by Joby Puthuparampil Johnson)