Cognizant 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.
With more than $3 billion in combined healthcare revenue, Cognizant and TriZetto will serve nearly 245,000 healthcare providers, as well as approximately 350 payers in the U.S.“Healthcare is undergoing structural shifts due to reform, cost pressure and shifting responsibilities between payers and providers,” said Francisco D’Souza, CEO of Cognizant. “This creates a significant growth opportunity, which TriZetto will help us capture.”
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, and 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% of Cognizant’s revenue.
The deal will position Cognizant to address the rapidly-changing healthcare marketplace with next-generation solutions that increase efficiency, reduce costs and improve healthcare outcomes.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.