Sold: Cognizant buys TriZetto for $2.7B

September 16, 2014 in Medical Technology

Outsourcing company Cognizant, which provides healthcare technology services to providers and payers, will buy health IT software company TriZetto for $2.7 billion in cash. TriZetto provides similar healthcare IT services to the same market.

Cognizant executives confirmed in a conference call this morning the deal, which had been anticipated for weeks. The agreement is subject to changes.

Reuters reported Aug. 19 that private equity firm Apax Partners, which, along with partners BlueCross BlueShield of Tennessee and Cambia Health Solutions, purchased TriZetto in 2008, were exploring a sale of TriZetto, “hoping to fetch as much as $3 billion, including debt.”

[See also: TriZetto plans to create 750 new jobs.]

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, which is expected to close in the fourth quarter.

“Healthcare is undergoing structural shifts due to reform, cost pressure and shifting responsibilities between payers and providers,” Cognizant CEO Francisco D’Souza said in a press statement. “This creates a significant growth opportunity, which TriZetto will help us capture,”

D’Souza added that the combined portfolios across technology and operations would position Cognizant to better help clients drive higher levels of efficiency. He expects the acquisition will boost Cognizant’s market position and strategy to better aid its clients, he said.

  • He noted that TriZetto brings to Cognizant 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 health plans and four pharmacy benefit management companies.

[See also: TriZetto gains market share with acquisition.]

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, in a news release. “Our agreement with Cognizant advances our vision of simplifying healthcare for everyone.

Cognizant President Gordon Coburn sees it the TriZetto acquisition as an opportunity to integrate services across Cognizant’s three major offerings – traditional IT services; high-growth businesses such as management consulting, business process services and IT infrastructure services; and emerging delivery models.

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Article source: http://www.healthcareitnews.com/news/sold-cognizant-buys-trizetto-27b

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