Activist investor Elliott Management sent a lengthy letter to Cognizant Technology Services (CTSH) on Monday, and less than 24 hours later the IT services company tied up a deal to buy digital marketing agency Mirabeau.
Elliott owns more than 4% of Cognizant and is one of the company's top four shareholders. The firm's investment is valued at about $1.4 billion.
On Monday, the activist fund detailed what it dubbed a three-part "value-enhancement plan" for Teaneck, NJ-based Cognizant in an open letter. The plan involves Cognizant taking on additional debt and instituting a $2.5 billion accelerated share repurchase program.
Additionally, Elliott pushed Cognizant to fund more research and development as well as complete more mergers and acquisitions.
The pressure comes because Elliott feels that Cognizant, despite being a leader in the IT services market, has shown a "deep underperformance across all relevant benchmarks, including its closest peers, over all time periods during the last five years."
Using Elliott's plan, however, Cognizant stock can jump to $80 to $90 per share by year's end 2017, the firm said. After gaining about 10% on Monday, Cognizant stock was down 2.12% to $55.74 late Tuesday afternoon. The shares are down about 7% year-to-date.
Cognizant issued a statement on Monday, saying that the company "welcomes open communications with all of its shareholders and values their input," adding that Cognizant has met with Elliott and will continue to review the agency's suggestion.