Cognizant, the US-based outsourcing services major with a predominantly Indian technology service-delivery footprint, on Monday said it will acquire digital engineering firm Belcan for $1.29 billion (around Rs 10,700 crore) in cash and stock. US-based Belcan has been backed by American private equity firm AE Industrial Partners since 2015.
The buyout will help Cognizant expand its footprint in the aerospace, defense, space and automotive sectors, primarily in North America and the United Kingdom (UK), as per the company statement.
“The revenue the acquired business is expected to be over $800 million on an annualised basis and has grown at an 8% compound annual growth rate (CAGR) over the last two years,” the company said in a statement. The total purchase price of approximately $1.29 billion 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’s statement added. Cognizant intends to increase its share repurchase plan to maintain current share count guidance of 497 million for the full year 2024. In Q1 results in May, Cognizant projected a 100 basis points (bps) inorganic contribution to its full fiscal year revenue growth outlook between -2% and 2% ending December. For Q2FY24, it guided 0- 1.5% increase in the range of $4.75 billion to $4.82 billion.
“We believe that acquiring Belcan will strengthen Cognizant’s position in the sizable and fast-growing ER&D services market. Belcan’s deep engineering capabilities and domain expertise across the aerospace & defence 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,” said Cognizant CEO Ravi Kumar S. The transaction is anticipated to close in the quarter ending September 30, 2024, subject all regulatory approvals and conditions.
Source: Economic Times