Cognizant Says Deal With Health Net Will Not Be Implemented, Reiterates Outlook

(RTTNews) - Cognizant Technology Solutions Corp. (CTSH) said Thursday if the planned merger of Health Net, Inc. (HNT) and Centene Corp. (CNC) is completed, its existing seven-year master services agreement with Health Net will not be implemented due to likely overlaps in services and capabilities planned to be provided by Cognizant.

In addition, Cognizant reaffirmed its financial outlook for fiscal 2015. The company is a provider of IT, consulting and BPO services.

Gordon Coburn, President of Cognizant said, "As we congratulate Health Net and Centene today, we look forward to continuing to partner with them to support their technology and operations requirements."

Healthcare plan provider Centene said earlier today that it has agreed to acquire managed health care company Health Net in a cash and stock deal valued at about $6.8 billion, including assumed debt of about $500 million.

The deal will create a diversified multi-national healthcare enterprise with more than ten million members across the U.S., with estimated 2015 pro forma premium and service revenues of about $37 billion.

Cognizant said it will continue to remain a key strategic technology and operations partner to Health Net, with the existing relationship being extended through the end of 2020 with a total contract value of about $520 million.

However, Cognizant noted that the planned implementation of a seven-year master services agreement for end-to-end administrative services between it and Health Net will be deferred while Health Net and Centene complete the merger review and approval process. The master services agreement was first announced in August 2014 and scheduled to begin in mid-2015.

Cognizant added that if the merger of Health Net and Centene is completed, the existing master services agreement will not be implemented as there will likely be overlaps in services and capabilities planned to be provided by Cognizant.

Cognizant has negotiated the right to license certain Health Net intellectual property for incorporation into its healthcare management solutions and as-a-service platforms.

Looking ahead to fiscal 2015, Cognizant reaffirmed its financial outlook, previously stated on May 4, 2015. The company reiterated its outlook for adjusted earnings of at least $2.93 per share and revenue of at least $12.24 billion.

On average, analysts polled by Thomson Reuters expect the company to report earnings of $2.97 per share for the year on revenues of $12.33 billion. Analysts' estimates typically exclude special items.

Karen McLoughlin, Chief Financial Officer of Cognizant said, "Despite the anticipated loss of approximately $100 million in incremental revenues during the second half of 2015, we are pleased to reaffirm our guidance for the year due to continued strong demand and projected over-performance in other parts of our business. Today's announcement by Health Net will not impact our ability to achieve our goals for the year."

CTSH is trading at $60.06, down $2.06 or 3.32 percent on a volume of 4.55 million shares.