Cognizant to acquire US healthcare IT services firm TriZetto for $2.7 bn in cash

Cognizant Technology Solutions today announced a $2.7 billion all-cash deal to acquire healthcare IT services provider TriZetto Corp, from Apax Partners LLP, in its biggest acquisition so far. 

Cognizant said it has entered into a definitive agreement to acquire Englewood (Colorado)-based TriZetto Corporation, a leading provider of healthcare IT software and solutions, subject to customary adjustments.

Upon its acquisition, Cognizant and TriZetto will merge to create a fully-integrated healthcare technology and operations leader with more than $3 billion in combined healthcare revenue.

Cognizant said together the merged entity will serve nearly 245,000 healthcare providers, as well as approximately 350 payers with approximately 180 million lives covered in the US.

Cognizant's healthcare business, which accounted for about 26 per cent of total revenue in 2013, has declined in the last three quarters. The acquisition is aimed at boosting it, Cognizant said.

"Healthcare is undergoing structural shifts due to reform, cost pressure and shifting responsibilities between payers and providers. This creates a significant growth opportunity, which TriZetto will help us capture," said Francisco D'Souza, co founder and CEO Cognizant.

"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. We look forward to welcoming the TriZetto team into the Cognizant family and creating a truly differentiated and sustainable foundation for healthcare."

Cognizant expects the acquisition of TriZetto to accelerate significantly its market position and strategy of delivering innovative healthcare software and solutions to a wide range of healthcare clients.

TriZetto will bring significant and complementary new market opportunities, expertise and intellectual property, including, multiple industry-leading software platforms used by payers and providers and enhanced competitiveness in integrated engagement opportunities, Cognizat said in a release.

The acquisition has the potential to generate approximately $1.5 billion in additional revenue over the next five years, Cognizant said.

Under the terms of the deal, TriZetto and its 3,700 employees will be 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.

According to Gordon Coburn, president of Cognizant, "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."

Cognizant CFO Karen McLoughlin said the transaction is expected to be immediately accretive to the company's non-GAAP EPS, excluding one-time transaction costs and adjustments.

Cognizant proposes to finance the transaction through a combination of cash on hand and debt, and has secured $1 billion of committed financing in support of the transaction. The transaction is expected to close in the fourth quarter of 2014.

The purchase agreement provides for customary closing conditions and purchase price adjustments including, without limitation, adjustments for items such as cash, indebtedness and working capital.

Cognizant was advised by Credit Suisse, UBS Securities LLC and Centerview Partners were advisors to Cognizant in the deal wile by Latham & Watkins LLP and Nishith Desai Associates provided legal counsel.

TriZetto was advised by JP Morgan Securities LLC and Goldman, Sachs & Co. Legal counsel to TriZetto was provided by Kirkland & Ellis LLP.