NEW YORK (TheStreet) –– Cognizant's (CTSH - Get Report) plan to acquire TriZetto for $2.7 billion would create a healthcare technology company poised to capitalize on a sector that is undergoing massive changes as providers and consumers adjust their demands to changes in federal and state laws as well as consumer preferences.
"The acquisition was driven by two large factors," Malcolm Frank, Cognizant Executive Vice President, Strategy and Marketing said in a phone interview with TheStreet. "We think there's tremendous change and opportunity over next decade plus, and from tech standpoint, social and mobile and big data are changing delivery models. We saw those two coming together and the strength that we have in healthcare, there was a unique opportunity to bring the two together."
TheStreet's Brittany Umar has more on Cognizant's purchase of TriZetto:
Frank explained that the methods of sending software and IT infrastructure to clients are changing, so it made sense to have a partner with "deep industry knowledge" that could a leader in the healthcare space. "There's lots of opportunity in the here and now, and it sets up well for evolution of heathlcare market going forward," he said.
Based in Englewood, CO, privately-held TriZetto is a leading provider of healthcare IT software and solutions. If the deal is approved by federal regulators, TriZetto would add $1.5 billion in revenue to Cognizant over the next five years as well as additional non-linear software revenue. In the press release, Cognizant said the deal would be "immediately accretive to Cognizant's non-GAAP EPS, excluding one-time transaction costs and adjustments."
"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," said Cognizant CEO Francisco D'Souza in a statement. "We are excited that 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. We look forward to welcoming the TriZetto team into the Cognizant family and creating a truly differentiated and sustainable foundation for healthcare."
Cognizant was falling 0.1% to $44.71.
Frank added that Cognizant had been looking at this kind of strategic kind of deal for two to three years, so when the TriZetto opptortunity arose, it fit the company's view of the market. "We've been partners for many years, we have a long working relationship, and our partnership model works because there's no overlap."
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 percent of Cognizant's revenue.
Both companies expect the deal to close in the fourth quarter of 2014.
--Written by Chris Ciaccia in New York
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