(StartName) – Cognizant Technology Solutions Corp <CTSH.O> struck its biggest deal on Monday, acquiring healthcare IT services provider TriZetto Corp for $2.7 billion to beef up its slowing healthcare business.
Shares of the company, which is buying TriZetto from London-based private equity firm Apax Partners LLP, rose nearly 3 percent in premarket trading.
Cognizant’s healthcare business, which accounted for about 26 percent of total revenue in 2013, has declined in the last three quarters.
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 <TCS.NS> and Infosys Ltd <INFY.NS>, 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 StartName in August.
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 financing.
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 advised TriZetto.
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)