Cognizant To Acquire Belcan For About $1.3 Bln Cash And Stock

(RTTNews) - Cognizant Technology Solutions Corp. (CTSH) announced Monday it has signed a definitive agreement to acquire Belcan, LLC, a portfolio company of AE Industrial Partners and a supplier of Engineering Research & Development (ER&D) services, at a purchase price of approximately $1.3 billion in cash and stock, subject to customary adjustments.

Belcan provides mission-critical digital engineering services for a long-standing customer base across the commercial aerospace, defense, space, marine and industrial verticals, primarily in North America and the United Kingdom.

The acquisition will significantly expand Cognizant's ER&D capabilities, building upon the Company's leadership in the Internet of Things (IoT) and Digital Engineering practice areas.

Combining with Belcan will also add scale and enable Cognizant to establish a leadership position in the high-growth aerospace & defense (A&D) industry with a blue-chip client base, deep domain expertise, and significant technological capabilities with over 6,500 engineers and technical consultants.

The revenue the acquired business will contribute to Cognizant in 2024 depends on the timing of the close but is expected to be over $800 million on an annualized basis. Revenue from the acquired business has grown at an 8% compound annual growth rate (CAGR) over the last two years.

Cognizant expects the transaction to significantly expand its access to the about $190 billion ER&D services market, which is expected to grow at an over 10% forward CAGR through 2026, complementing its existing IoT and Digital Engineering practice areas.

The transaction creates shareholder value through enhanced growth opportunities and expected EPS accretion in 2026 and expected to be broadly neutral to EPS in 2025. It is expected to deliver over $100 million in annual revenue synergies within three years, with additional cost synergies expected over time.

Lance Kwasniewski, the CEO of Belcan, is expected to continue to lead Belcan, which will continue to operate under the Belcan name as an operating unit of Cognizant. Cognizant will also establish a dedicated integration program office to drive execution against strategic and financial goals for the transaction.

The transaction is anticipated to close in the quarter ending September 30th, 2024, subject to the receipt of required regulatory approvals and other closing conditions.

The total purchase price of approximately $1.29 billion, subject to customary adjustments, comprises $1.19 billion in cash consideration and a fixed 1.47 million Cognizant shares, with a current value of $97 million based on Cognizant's closing share price on Friday, June 7, 2024.

The cash consideration is expected to be funded through a mix of cash on hand and debt. Cognizant intends to increase its share repurchase plan to maintain current share count guidance of 497 million for the full year 2024.