Cognizant buying TriZetto to boost its healthcare business
Cognizant Technology Solutions, an outsourcing firm, just bought TriZetto for $2.7 billion as it looks to buildup its healthcare technology services.
The all-cash deal is Cognizant’s (CTSH) biggest ever and positions the company to cash in on an industry that currently represents 17% of U.S. gross domestic product, the company said Monday. The combined company has more than $3 billion in healthcare revenue, as well as about $1.5 billion of potential revenue synergies over the next five years from which Cognizant can cull further gains.
“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,” Francisco D’Souza, CEO of Cognizant, said in a statement.
The growth would be well-received by investors who have pulled out of Cognizant this year, sending the stock down 11% since the start of 2014, after the company reduced its annual revenue outlook in August due to delays in closing tech-service deals.
Healthcare accounts for 26% of Cognizant’s revenue, which totaled $8.84 billion last year. Adding on TriZetto will help the company build up its revenue in the healthcare sector even further.
“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,” said D’Souza.
TriZetto, a provider of healthcare information technology software and solutions, was owned primarily by private-equity firm Apax Partners. BlueCross BlueShield of Tennessee and Cambria Health Solutions, both minority shareholders, will also sell their stakes in the company, Apax said in a statement.