Shares of the company, which is buying TriZetto from London-based
private equity firm Apax Partners LLP, rose nearly 3 percent in
Cognizant's healthcare business, which accounted for about 26
percent of total revenue in 2013, has declined in the last three
The company provides services such as claims processing, billing and
call center operations to insurers, hospitals and some state-run
healthcare exchanges set up under President Barack Obama's
Affordable Care Act, also known as Obamacare.
TriZetto provides information technology services, including care
management and the administration of benefits. The company said it
reaches 245,000 healthcare providers, representing more than half of
the insured population in the United States.
Englewood, Colorado-based TriZetto is the latest U.S. healthcare IT
services provider to be acquired as payers and providers of
healthcare seek new ways to cut costs.
"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 statement.
"This creates a significant growth opportunity, which TriZetto will
help us capture."
The company in August forecast its slowest full-year sales growth in
its 20-year history.
Cognizant, whose rivals include Tata Consultancy Services Ltd and
Infosys Ltd , said it expected revenue synergies of $1.5 billion
over the next five years from the deal.
The company said the deal would immediately add to adjusted profit
on closing, expected in the quarter ending December.
Apax Partners, which acquired TriZetto in 2008, was exploring a sale
of the company, sources told Reuters in August.
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TriZetto had 12-month earnings before interest, tax, depreciation
and amortization of more than $190 million as of June 30, one of the
sources had then said.
Cognizant said on Monday it would fund the deal through a
combination of cash and debt and had secured $1 billion in
The deal comes after private equity firms Silver Lake Partners LP
and BC Partners Ltd sold health insurance claims processor MultiPlan
Inc for $4.4 billion in March to a consortium led by Maurice "Hank"
Greenberg's buyout firm Starr Investment Holdings LLC.
Credit Suisse, UBS Securities LLC and Centerview Partners advised
Cognizant, while J.P.Morgan Securities LLC and Goldman Sachs & Co
Cognizant's shares closed at $44.76 on the Nasdaq on Friday.
(Reporting by Soham Chatterjee in Bangalore; Editing by Saumyadeb
Chakrabarty and Sriraj Kalluvila)
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