No better time than today to acquire US co TriZetto, says Cognizant

New Delhi: Cognizant on Mondaysaid it will acquire US-based TriZetto Corporation for $2.7 billion in an all cash deal, a move which will help the IT services firm tap the lucrative healthcare IT software and solutions market.

The acquisition will create an entity with more than $3 billion in combined healthcare revenue, serving around 245,000 healthcare providers (hospitals, clinics, etc) and about 350 payers (health insurers).

Privately-held TriZetto is a provider of healthcare IT software and solutions. Founded in 1997, TriZetto has 13 offices in the US and two in India.

Cognizant President Gordon Coburn told CNBC-TV18, “There cannot be a better time than today to acquire TriZetto,” Coburn said.

The deal is likely to be completed by Q4 of 2014. “The revenue guidance did not factor in the TriZetto acquisition,” Coburn said, adding that any revenue from TriZetto will be incremental to guidance. Coburn said the deal was completed for revenue synergies and will help the company compete for larger deals.

Through the deal, the New Jersey-headquartered Cognizant aims to tap the rapidly changing healthcare marketplace, which is about 17 per cent of the US GDP of over $17 trillion.

Healthcare currently represents around 26 per cent of Cognizant’s revenue. The firm had reported a net profit at $300.4 million in April-June quarter this year on a revenue of $2.16 billion.

In a statement, Cognizant said: “It has entered into a definitive agreement to acquire TriZetto Corporation for $2.7 billion in cash, subject to customary adjustments.”

TriZetto and its 3,700 employees will become a part of Cognizant’s existing healthcare business, which currently serves more than 200 clients, it added.

Commenting on the deal, Cognizant President Gordon Coburn said: “It (acquisition) represents a great opportunity to integrate services across our three horizons-traditional IT services, high-growth businesses like management consulting, business process services and IT infrastructure services and emerging delivery models.”

Cognizant CEO Francisco D’Souza 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,” he added.

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

“That earnings benefit is expected to increase over time as we realise significant revenue synergy potential from the combination of these businesses,” she added.

PTI