Cognizant Technology Solutions Corporation (NASDAQ:CTSH) inked a definitive agreement to acquire Belcan, LLC, a portfolio company of AE Industrial Partners, for about $1.3 billion in cash and stock, subject to customary adjustments.
The total purchase price includes $1.19 billion in cash and a fixed 1.47 million Cognizant shares, valued at around $97 million based on Cognizant's closing share price on Friday, June 7, 2024.
The acquisition will boost Cognizant's ER&D capabilities and strengthen its IoT and Digital Engineering leadership.
With this deal, Cognizant expects to significantly expand its access to the ~$190 billion ER&D services market, projected to grow at over a 10% CAGR through 2026.
The transaction is expected to close in the September 2024 quarter, pending receipt of necessary regulatory approvals and fulfillment of other closing conditions.
The revenue the acquired business will contribute to Cognizant in 2024 is expected to exceed $800 million annually, depending on the timing of the deal closure.
Synergies: The company projects deal to shareholder value with growth opportunities, expecting EPS accretion in 2026 and a neutral impact on EPS in 2025.
It anticipates to achieve over $100 million in annual revenue synergies within three years, with further cost synergies anticipated over time.
Cognizant plans to enhance its share repurchase program to sustain the current share count guidance of 497 million for 2024.
Cognizant CEO Ravi Kumar S, stated, "Belcan's deep engineering capabilities and domain expertise across the aerospace & defense market will be complemented by Cognizant's scale and own multi-decade digital engineering expertise, providing Belcan's blue-chip client roster access to our advanced AI, Cloud and Data technologies."
"We see the opportunity to immediately accelerate revenue growth and create compelling shareholder value through our combined engineering capabilities. Belcan's clients would gain access to Cognizant's full suite of technology services, while Cognizant's clients across the manufacturing, automotive, energy, and high-tech sectors we believe will benefit from Belcan's engineering skills."
Lance Kwasniewski, Belcan's CEO, is expected to continue leading the company, which will continue to operate under the Belcan name as an operating unit of Cognizant.
Cognizant expects to fund the cash consideration through a mix of cash on hand and debt. As of March-end, cash and cash equivalents stood at $2.23 billion.
Investors can gain exposure to the stock via Alpha Architect U.S. Quantitative Value ETF (NASDAQ:QVAL) and First Trust Exchange-Traded Fund First Trust S&P 500 Diversified Free Cash Flow ETF (NYSE:FCFY).
Price Action: CTSH shares are down 0.67% at $65.50 premarket at the last check Monday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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