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Wipro buys Canada-based ATCO's IT services arm for $195 million

The IT major has also bagged a 10-year total outsourcing contract from ATCO Ltd with a projected annual revenue of about $112 million for the next ten years

Debojyoti Ghosh
Published: Jul 18, 2014 03:21:19 PM IST
Updated: Jul 18, 2014 04:21:37 PM IST
Wipro buys Canada-based ATCO's IT services arm for $195 million
Image: Getty Images

India’s third-largest IT services exporter Wipro on Friday announced the acquisition of ATCO I-Tek, the IT-services arm of Canadian utilities and logistics company ATCO for an all-cash deal of $195 million ($210 million Canadian dollars). It is the second-largest buy for Wipro since it acquired the US-based IT firm Infoscrossing Inc.for $600 million in 2007.

With this deal the Bangalore-based software-services major expects to ramp up its presence in Canada and Australia and boost its IT business in the natural gas space. Earlier to strengthen its energy, natural resources and utilities business, in April 2011, Wipro acquired the US-based Science Applications International Corporation (SAIC)’s global oil and gas information technology business for $150 million.

Over the last few years, Wipro’s inorganic route has given them access to different technologies and business verticals. Among its recent deals, in December 2013, Wipro acquired US-based Opus Capital Markets Consultants for $75 million tapping in the mortgage space of the financial services sector. In April 2012, the IT firm acquired Australia-based Promax Applications Group (PAG) for A$35 million, providing it a strong access in the analytics space.  

With a team of over 700 people and three data centres, ATCO I-Tek provides services in enterprise asset management, managed services and customer care and billing. Anand Padmanabhan, chief executive - energy, natural resources and utilities, Wipro said during the telephonic press briefing that over 500 employees from ATCO I-Tek, who are domain experts in the utilities space will be joining the IT firm as part of the deal. The remaining 200 employees will be with ATCO as part of their BPO and other internal businesses. The deal is expected to close during the current quarter, Padmanabhan told media.   

Over the last one year, Wipro has also made strategic investments, which would give them an edge in areas of emerging technologies by picking up minority stakes in companies. Last year in May, it made a strategic minority investment of $30 million in US-based Opera Solutions, a big data analytics firm.

With the current acquisition of the Canadian IT subsidiary, Wipro also announced a 10-year total outsourcing contract from ATCO Ltd, whose businesses span across energy, utilities and technology. The deal, one of the largest for the Bangalore-based IT firm, is projected to result in an annual revenue of about $112 million (over $120 million Canadian dollars) for the next ten years, up to December 2024. As part of the agreement, Wipro will provide complete IT services to ATCO in Canada and Australia.  

“We traditionally had a strong position in the utilities space in Europe and this engagement provides momentum to our business in Canada and Australia. The alliance with ATCO enhances our capability to create, nurture and tap local talent to power our growth journey in Canada,” said Padmanabhan.   

The deal comes at a time when the Azim Premji-led company has been showing consistent earnings. Wipro has maintained its growth momentum over the last three quarters, indicating that the IT major's turnaround measures have started to yield results. In rupee terms, Wipro recorded a year-on-year growth of 41 percent in net income for the March quarter. The IT-services exporter posted profit of Rs 2,230 crore during the January-March period.  

The company will announce its first quarter earnings for the current fiscal on July 24, 2014.  

“This alliance ensures ATCO can focus on growing our core businesses of structures and logistics, utilities, and energy while partnering with Wipro for strategic, innovative IT solutions required to support our global operations,” said Brian Bale, senior vice president and CFO, ATCO.  

In February this year, Wipro bagged a 10-year contract from UK-based Carillion, a support services company to provide IT and BPO services. Wipro did not disclose the value while announcing the deal. However, according to reports it was estimated to be over $100 million. Carillion operates across multiple sectors in the UK, West Asia and Canada, providing solutions like project finance, design, construction and support services.

Shares of Wipro closed at Rs 547.70, up 1.83 percent on Friday on the Bombay Stock Exchange, while the sensitive index, Sensex, ended the day marginally up 0.31 percent.

(This story appears in the 25 July, 2014 issue of Forbes India. To visit our Archives, click here.)

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