Cognizant TriZetto takeover deal worth $2.7 billion agreed

A Cognizant Trizetto takeover deal for $2.7 billion in cash has been agreed by the two companies. The New Jersey-based multinational information technology, consulting and business process outsourcing firm says it has entered into a definitive agreement to acquire the Engelwood-based, privately-held healthcare IT services provider.

Cognizant Technology Solutions says it is looking to capitalize on the changes underway in healthcare information technology that have resulted from regulatory reform.

Cognizant has 187,000 workers. In 2013, the company posted revenue of $8.8 billion.

TriZetto Corporation, which employes 3,800 people in the US and India, has more than 350 health plans and almost 245,000 physicians and other health care providers as customers. The company was founded in 1997.

The combined entity will serve more than 245,000 healthcare payers and providers, covering approximately 180 million Americans.

Cognizant is purchasing a majority stake from London-based equity firm Apax Partners, as well as minority shareholdings from Cambia Health Solutions and BlueCross BlueShield.

Francisco D’Souza, CEO of 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.”

“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 says the purchase will help speed up its market position and strategy of delivering innovative healthcare software and solutions to a significantly wider range of clients in the healthcare industry.

In 2013, Cognizant’s healthcare business segment accounted for approximately 26% of all its revenue.

Cognizant Technology Solutions
Healthcare accounts for about one quarter of Cognizant’s business.

Benefits for Cognizant

According to Cognizant, TriZetto brings it the following additional benefits:

  • Multiple industry-leading software platforms utilized by providers and payers,
  • superior competitiveness in integrated engagement opportunities,
  • potential revenue synergies totaling about $1.5 billion over a five-year period,
  • greater non-linear software income.

Jude Dieterman, President and COO of TriZetto, said:

“TriZetto solutions enable the healthcare interactions of millions of people in the U.S. every day. Our agreement with Cognizant advances our vision of simplifying healthcare for everyone. We believe the combination of Cognizant and TriZetto’s talented employees and innovative technology and operations will have a meaningful impact on the way health is managed and care is delivered.”

The deal, which is subject to regulatory approval, will be financed through a combination of cash-on-hand and debt. Cognizant says it has secured $1 billion of committed financing in support of the acquisition, which is expected to close in Q4 2014.

In August, Cognizant reduced its revenue estimate for 2014.

Partner in the Healthcare Group at Apax Partners, Buddy Gumina, said:

“We are proud of our role in partnering with such an important company in the healthcare technology and services sector.  TriZetto is well positioned for future growth as its mission-critical solutions continue to add value to customers navigating the dynamic U.S. healthcare system.”

TriZetto’s financial advisers were J.P. Morgan Securities LLC and Goldman, Sachs & Co., and its legal advisor was Kirkland & Ellis LLP.

Cognizant was advised by Centerview Partners, UBS Securities LLC and Credit Suisse. Its legal advisers were Nishith Desai Associates and Latham & Watkins LLP.

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