TriZetto: Shelter from Scrutiny, Better Valuation

Getting out of Wall Street’s glare likely was on the minds of executives at Newport Beach-based TriZetto Group Inc.

As recently as March, shares of TriZetto slumped after customer WellPoint Inc. warned that quarterly profits would fall short of expectations.

Some speculated TriZetto’s claim processing software was a factor in WellPoint’s warning. That rumor turned out to be wrong, but not before knocking off about 10% from TriZetto’s market value.

The company’s shares since have rebounded, with a market value of $900 million last week.

It’s the type of gyration TriZetto won’t have to deal with if a proposed buyout goes through. Last month, the company struck a $1.4 billion deal to be bought and go private with New York-based private equity in-vestor Apax Partners Inc.

The deal’s set to close in four to six months.

“Going private will give us greater flexibility in thinking about longer-term investments in product development, acquisitions and partnerships that will benefit our customers,” Chief Executive Jeffrey Margolis said during the company’s first-quarter earnings call last month.

There’s also the valuation question: Some contend TriZetto was underappreciated on Wall Street. Apax’s offer was 25% more than what TriZetto was trading at before the deal was announced.

“The operating environment is such that they’re doing well, but the Street is not valuing them at an appropriate level, so they’ve chosen to accept this offer because of that,” said K. Newton Juhng, an analyst with BB