Cognizant Strengthens Engineering Muscle with $1.3B Belcan Buyout
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) has made a significant move by finalizing a deal to acquire Belcan, LLC for approximately $1.3 billion in cash and stock. This acquisition, which includes $1.19 billion in cash and 1.47 million Cognizant shares, is set to enhance Cognizant’s Engineering, Research, and Development (ER&D) capabilities while solidifying its leadership in the Internet of Things (IoT) and Digital Engineering sectors.
The acquisition of Belcan is expected to expand Cognizant’s reach in the growing ER&D services market, valued at around $190 billion and projected to experience a compound annual growth rate of over 10% through 2026. The deal is anticipated to be finalized in the September 2024 quarter, pending regulatory approvals and other closing conditions.
Cognizant foresees the acquired business contributing over $800 million in revenue annually in 2024, with potential synergies to drive shareholder value. The company aims to achieve revenue synergies of over $100 million within three years and plans to enhance its share repurchase program to maintain a consistent share count.
CEO Ravi Kumar S expressed excitement about the merger, emphasizing Belcan’s expertise in the aerospace & defense market and how it complements Cognizant’s digital engineering capabilities. The collaboration is expected to accelerate revenue growth and offer clients access to a broader range of technology services.
Belcan’s CEO, Lance Kwasniewski, will continue to lead the company under the Belcan name as part of Cognizant. The acquisition will be funded through a combination of cash reserves and debt, with cash and cash equivalents totaling $2.23 billion as of March.
Investors interested in Cognizant can access the stock through various ETFs such as Alpha Architect U.S. Quantitative Value ETF (QVAL) and First Trust S&P 500 Diversified Free Cash Flow ETF (FCFY). As of the latest premarket check, CTSH shares were trading down 0.67% at $65.50.
In conclusion, Cognizant’s acquisition of Belcan marks a strategic move to enhance its engineering capabilities and expand its market presence. The merger is expected to drive revenue growth, create synergies, and offer clients a comprehensive suite of technology services across multiple sectors.