Significantly expands access to the
~$190 billion rapidly growing,
specialized
Engineering Research &
Development services market
Immediately accelerates growth opportunity
through presence in attractive
aerospace
& defense sector with established blue-chip clients
Expected to deliver >$100 million in annual revenue
synergies
within three years and to be
accretive to 2026 EPS
Cognizant to host investor conference call
to discuss transaction on June 10,
2024 at 8:30 a.m.
Eastern
TEANECK,
N.J., June 10, 2024 /PRNewswire/
-- Cognizant (NASDAQ: CTSH) (the "Company") today announced it
has signed a definitive agreement to acquire Belcan, LLC
("Belcan"), a portfolio company of AE Industrial Partners and a
leading global 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 is an established player in ER&D that 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 (UK).
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.
"We believe that acquiring Belcan will strengthen Cognizant's
position in the sizable and fast-growing ER&D services market,"
said Cognizant CEO Ravi Kumar S.
"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."
Kumar continued, "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."
As a result of this transaction, Cognizant expects to:
- Significantly expand its access to the ~$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
- Diversify into the fast-growing A&D, space and marine
sectors, with a stable set of blue-chip clients
- Add a highly skilled, technical and accredited workforce and an
employer of choice in ER&D services
- Create shareholder value through enhanced growth opportunities
and expected EPS accretion in 2026; expected to be broadly neutral
to EPS in 2025
- Deliver over $100 million in
annual revenue synergies within three years, with additional cost
synergies expected over time
- Complement the highly talented and strong US/UK based workforce
of Belcan with the talent pool from Cognizant's global delivery
network to support global programs in the Belcan client base
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.
"We are excited about this unique combination and the value
creation it will bring to our customers, along with the
opportunities it will provide for our employees. Cognizant will
better position our team to capitalize on compelling tailwinds,
including increasing outsourced ER&D spend, the transformative
impact of digital engineering adoption rates, robust commercial
aerospace demand, and favorable long-term defense and space
spending," said Mr. Kwasniewski. "Belcan's experienced team has
built a growth-oriented business delivering highly complex,
mission-critical, scalable services to our long-standing customer
base. I look forward to continuing to lead our team as we unite and
leverage Belcan's and Cognizant's comprehensive services and
cross-industry clientele to execute on our collective strategy,
ultimately earning the role of our clients' most trusted partner in
intelligent engineering."
Transaction Details
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.
Advisors
Perella Weinberg Partners served as
financial advisor and Arnold & Porter served as legal advisor
to Cognizant. Jefferies and Solomon Partners acted as financial
advisors and Kirkland & Ellis served as legal advisor to
Belcan.
Conference Call Details
Cognizant will host a
conference call on June 10, 2024, at
8:30 a.m. (Eastern) to discuss the
transaction. To listen to the conference call, please dial (877)
810-9510 (domestic) or +1 (201) 493-6778 (international).
About Cognizant
Cognizant (Nasdaq: CTSH) engineers
modern businesses. We help our clients modernize technology,
reimagine processes and transform experiences so they can stay
ahead in our fast-changing world. Together, we're improving
everyday life. See how at www.cognizant.com or @cognizant.
About Belcan
Founded in 1958, Belcan is a global
supplier of design, software, manufacturing, supply chain,
information technology, and digital engineering services to the
aerospace, defense, space, marine, government services, automotive,
and industrial markets. Belcan engineers better outcomes for
customers – from jet engines, airframe, and avionics to heavy
vehicles, automobiles, and cybersecurity.
Forward Looking Statements
This press release
includes statements that may constitute forward-looking statements
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the accuracy of which is
necessarily subject to risks, uncertainties and assumptions as to
future events that may not prove to be accurate. These statements
include, but are not limited to, express or implied forward-looking
statements relating to the anticipated growth of the ER&D
services market and A&D sector; the benefits of the proposed
transaction between us and Propulsion Holdings, LLC ("Belcan") (the
indirect parent of Belcan, LLC), including the impact of the
acquisition of Belcan on the business and prospects of both
Cognizant and Belcan, including revenue, synergies, new business
opportunities, growth, expansion and the anticipated impact of the
transaction on our future financial and operating results; the
expected timing of the transaction closing; the combined company's
plans, objectives, expectations and intentions, including the
contemplated increase in Cognizant's share repurchase plan; and
other statements that are not historical facts. These statements
are neither promises nor guarantees, but are subject to a variety
of risks and uncertainties, many of which are beyond our control,
which could cause actual results to differ materially from those
contemplated in these forward-looking statements. Existing and
prospective investors are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof. Factors that could cause actual results to differ
materially from those expressed or implied include the risk that
the revenue synergies and any cost savings from the transaction may
not be fully realized or may take longer than anticipated to be
realized; disruption to the parties' businesses as a result of the
announcement and pendency of the transaction; the ability by each
of Cognizant and Belcan to obtain required approvals of the
transaction on the timeline expected, or at all, and the risk that
such approvals may result in the imposition of conditions that
could adversely affect us after the closing of the transaction or
adversely affect the expected benefits of the transaction;
reputational risk and the reaction of each company's customers,
suppliers, employees or other business partners to the transaction;
the failure of the closing conditions in the merger agreement to be
satisfied, or any unexpected delay in closing the transaction or
the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement; the
possibility that the transaction may be more expensive to complete
than anticipated, including as a result of unexpected factors or
events; risks related to management and oversight of the expanded
business and operations of Cognizant following the transaction due
to the increased size and complexity of its business; the
possibility of increased scrutiny by, and/or additional regulatory
requirements of, governmental authorities as a result of the
transaction; the risk that combining Belcan's business and
operations into Cognizant will be more costly or difficult than
expected, or that we are otherwise unable to successfully integrate
Belcan's businesses with our own, including as a result of
unexpected factors or events; and general competitive, economic,
political and market conditions and other factors that may affect
our future results or that of Belcan, including general
economic conditions, the competitive and rapidly changing nature of
the markets we compete in, the competitive marketplace for talent
and its impact on employee recruitment and retention, our ability
to successfully implement our NextGen program and the amount of
costs, timing of incurring costs and ultimate benefits of such
plans, our ability to successfully use AI-based technologies,
legal, reputational and financial risks resulting from
cyberattacks, changes in the regulatory environment, including with
respect to immigration and taxes. Additional factors which
could affect future results are discussed in our most recent Annual
Report on Form 10-K and other filings with the Securities and
Exchange Commission. Cognizant undertakes no obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events, or otherwise, except as may be
required under applicable securities law.
For more information, contact:
Investors
|
Media
|
Tyler Scott – VP,
Investor Relations
Tyler.Scott@Cognizant.com
|
Jeff DeMarrais – VP,
Global Communications
Jeff.DeMarrais@Cognizant.com
|
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SOURCE Cognizant