Cognizant Monday said it will acquire US-based TriZetto Corporation for USD 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 USD 3 billion in combined healthcare revenue, serving around 245,000 healthcare providers (hospitals, clinics, etc) and about 350 payers.
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.
Through the deal, the New Jersey-headquartered Cognizant aims to tap the rapidly changing healthcare marketplace, which is about 17 percent of the US GDP of over USD 17 trillion.
Healthcare currently represents around 26 percent of Cognizant’s revenue. The firm had reported a net profit at USD 371.9 million (rpt) USD 371.9 million in April-June quarter this year on a revenue of USD 2.52 billion (rpt) USD 2.52 billion.
In a statement, Cognizant said: “It has entered into a definitive agreement to acquire TriZetto Corporation for USD 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.