Cognizant (NASDAQ: CTSH), a global leader in information technology, consulting and business process services, today announced that it has entered into a definitive agreement to acquire TriZetto Corporation for $2.7 billion in cash, subject to customary adjustments. Based in Englewood, CO, privately-held TriZetto is a leading provider of healthcare IT software and solutions.
"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, CEO of 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 this acquisition to accelerate significantly its market position and strategy of delivering innovative healthcare software and solutions to a wide range of healthcare clients. TriZetto brings to Cognizant significant and complementary new market opportunities, expertise and intellectual property, including:
- Multiple industry-leading software platforms used by payers and providers.
- Enhanced competitiveness in integrated engagement opportunities.
- Approximately $1.5 billion of potential revenue synergies cumulatively over the next five years.
- Attractive, non-linear software revenue.
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 U.S. health plans and four of the top five pharmacy benefit management companies. Healthcare currently represents approximately 26 percent of Cognizant's revenue.
"TriZetto solutions enable the healthcare interactions of millions of people in the U.S. every day," said Jude Dieterman, President and COO of TriZetto. "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."
"Cognizant and TriZetto have had a long-term relationship, having jointly served a number of healthcare clients to date," said 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."
"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. "That earnings benefit is expected to increase over time as we realize significant revenue synergy potential from the combination of these businesses."
Cognizant intends 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. Legal counsel to Cognizant 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.
Conference Call/Webcast
Cognizant will host a conference call on September 15, 2014 at 8:00 a.m. (Eastern) to discuss the transaction. To listen to the conference call, please dial (877) 810-9510 (domestic) and (201) 493-6778 or (412) 902-0170 (international) and provide the following conference passcode: Cognizant Call.
The conference call and corresponding presentation will also be available live via the Internet by accessing the Cognizant website atwww.cognizant.com. Please go to the website at least 15 minutes prior to the call to register and to download and install any necessary audio software.
For those who cannot access the live broadcast, a replay will be available by dialing (877) 660-6853 for domestic callers or (201) 612-7415 for international callers and entering 13590814 from two hours after the end of the call until 11:59 p.m. (Eastern) on Tuesday, September 30, 2014. The replay will also be available at Cognizant's website www.cognizant.com for 60 days following the call.
