Global BPO and technology firm Cognizant Technology Solutions Corp (NASDAQ:CTSH) announced on Monday, September 15th that it was buying healthcare IT services provider TriZetto Corp for around $2.7 billion to add growth to its healthcare management portfolio.
TriZetto offers larger businesses a variety of healthcare-related information technology services, such as care management and benefit administration. The firm works with over 245,000 healthcare providers, a number that represents more than half of the insured population in the United States
Statement from Cognizant CEO
In the company’s statement announcing the deal, Cognizant Chief Executive Francisco D’Souza said: “Healthcare is undergoing structural shifts due to reform, cost pressure and shifting responsibilities between payers and providers.”
He went on to say that, “This creates a significant growth opportunity, which TriZetto will help us capture.”
Cognizant health care revenues declining
A number of analysts have pointed out that Cognizant’s healthcare business, which accounted for more than a quarter of total revenue in 2013, has seen revenues drop for three consecutive quarters.
The firm provides a broad range of services such as claims processing, billing and call center operations for insurers, hospitals and a number of state-run healthcare exchanges.
At the most recent earnings report in August, ognizant Technology Solutions Corp (NASDAQ:CTSH) projected its slowest full-year sales growth in the company’s two-decade history..
Further details on the deal
Cognizant Technology Solutions Corp (NASDAQ:CTSH), whose main competitors are Tata Consultancy Services Ltd and Infosys Ltd ADR (NYSE:INFY) , said in its statement that it anticipated the Trizetto deal would provide revenue synergies of $1.5 billion over the next five years.
The firm also said the acquisition would immediately add to adjusted profit on closing, which should be reflected in the quarter ending in December.
According to a Reuters source, TriZetto had 12-month earnings before interest, tax, depreciation and amortization of greater than $190 million as of June 30.
The company’s statement on Monday also noted it planned to fund the deal through a combination of cash and debt, and had already lined up $1 billion in financing.