Wipro, India’s third-largest information technology services company, on Thursday said it had signed a definitive agreement to acquire Florida-based health care technology solutions provider, HealthPlan Services, for $460 million (Rs 3,144 crore).
The all-cash purchase will include a deferred payment of $20 million (Rs 136 crore). This is Wipro’s first major acquisition under the new leadership, and the second-biggest acquisition in the company’s history. In 2007, it had acquired Infocrossing for about $600 million. A major shift in the company’s “string of pearl” strategy, the acquisition is expected to help stimulate its growth, as it aspires to double its revenues to $15 billion (Rs 1 lakh crore) by 2010 — something the new chief executive officer Abidali Neemuchwala outlined soon after assuming the charge this month.
The acquisition of HealthPlan Services is expected to strengthen Wipro’s health care and life sciences business, which presently accounts for around 12 per cent of the company’s overall business.
In the last quarter, the vertical grew the fastest of 5.2 per cent on quarter-on-quarter basis and 4.9 per cent when compared with the same period in the previous year.
Founded in 1970, HealthPlan Services offers technology platforms and Business Process as a Service (BPaaS) solution to health insurance companies (payers) in the US. The company which is presently owned by Water Street Healthcare Partners, a strategic investor focused exclusively on the health care segment, connects the payers to over 40 public exchanges and over 150 private exchanges in the US. The company employs around 2,000 people located across its offices in Florida and Ohio. In calendar year 2015, HealthPlan Services had reported revenues of $223 million, a growth of close to 19 per cent over the previous year.
“The partnership with HealthPlan Services positions Wipro to participate in the shift of the US health insurance industry towards a consumer-centric business model,” said Jeffrey Heenan Jalil, Senior Vice President & Head- Healthcare Life Sciences and Services, Wipro Limited.
“HealthPlan Services strengthens Wipro’s position in the health insurance exchange market while offering synergies with Wipro’s presence in the Managed Medicare and Commercial Group Insurance markets. The addition of HealthPlan Services’ capabilities also complements Wipro’s strengths in claims processing and back office services,” he added.
The health insurance space in the US has seen a dramatic transformation in the last couple of years with the emergence of the Patient Protection and Affordable Care Act which Obamacare. The post-reform individual market is growing at a fast pace and is expected to continue to grow in coming years. “We are excited about what Wipro and HealthPlan Services can accomplish together for our customers and employees," said Jeff Bak, CEO and President of HealthPlan Services. “The combination creates the first true end-to-end solution in the individual under 65 commercial markets and the governmental over 65 and Medicaid markets. Together, Wipro and HealthPlan Services will give payers the power to accelerate growth strategies while providing both BPaaS and competitive administrative service solutions.”
As the competition heats up in the IT outsourcing services space with clients looking for newer digital technologies, Wipro, mostly like other offshore-centric IT services companies is going aggressive in its acquisition strategy.
In December 2015 itself, Wipro had made two acquisitions including German consulting firm cellent AG (for $77 million or Rs 517 cr) and New Jersey-based Viteos Group for $130 million (around Rs 860 crore).
As of 31 December, 2015, Wipro had a cash and cash equivalents reserves of Rs 30,624 crore ($4.63 billion).