Cognizant TECHNOLOGIES has planned to buyout TriZetto for $ 2.7 billion and thus expand its footprints as a provider of IT services to the US healthcare industry.
The company will use a combination of cash on hand and debt to fund the purchase. Teaneck, a New Jersey based company, has secured $ 1 billion of committed financing to support the business deal. An additional revenue of $ 1.5 billion is sought to be raised in the next five years.
Earlier this year, Cognizant announced a seven year contract with Health Net, a California based company, for US $ 2.7 billion. Gordon Coburn , President of Cognizant, said: “we anticipate that the TriZetto transaction will close in the fourth quarter , that is October to December 2014, subject to certain conditions. We also expect to close the Health Net deal during the same period.“
These transactions will give Cognizant a dominant position in the US healthcare market. Also, revenues from healthcare services as a proportion of total earnings would rise to 30 per cent.
TriZettos’ services reach over 245,000 healthcare providers, which is more than half of the health care population in the USA. The company’s revenues for the year ended June this year averaged US $ 711 million. The US healthcare industry is a lucrative market for the IT industry.
Nearly 26 per cent of Cognizant’s $ 2.52 billion in the quarter ended June this year was from health care services. This was the company’s largest source of revenue after banking, insurance and other financial services.