Wipro buys Canadian firm Atco I-Tek for $195 million

 India's third largest IT services company Wipro has acquired Atco I-Tek, the IT services arm of Canadian logistics and utilities provider Atco, for $195 million to boost its revenues from the natural gas and utilities business and expand its footprint in Canada.The acquisition comes bundled with a $1.2 billion IT outsourcing deal, the largest deal in the history of the company resulting in revenues of $112 million annually for the next ten years till 2024."The transformational deal has significant business outcomes and it's one of the largest deals for the company. We have 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," Anand Padmanabhan, chief executive — energy, natural resources and utilities in Wipro.The Atco I-Tek buyout is Wipro's second-largest acquisition after it bought US-based IT infrastructure management company Infocrossing in an all-cash deal for $600 million in 2007. Three years ago, Wipro acquired Science Applications International Corporation (SAIC) for an all-cash consideration of about $150 million.

Wipro has made one acquisition in the last 3 years, but it has signed strategic partnerships with US-based Axeda and Opera Solutions in emerging areas like machine learning and analytics.Atco I-Tek which has large operations in Western Canada, offers end-to-end IT services specializing in managed infrastructure services, applications management services, and customer care and billing. It has over 700 employees and expertise in over 750 applications, to help clients meet their critical business and IT needs."As part of the deal, we will be taking over 500 employees in Canada and 50 employees in Australia," he said. The remaining 200 employees will be retained to run its BPO operations. Wipro expects revenues from the deal to reflect in the September quarter.Padmanabhan said that Atco I-Tek's acquisition will help Wipro service other clients in the resource-rich regions of Alberta in Canada and Perth in Australia and strengthen its capabilities in consulting and process implementation. "It will open up significant local opportunities outside the Atco Group," he added.The energy and natural resources business has been one of the fastest growing businesses for Wipro clocking healthy margins not just at the company level, but also at the industry level. The division contributed 16% to its revenues in the 2014 fiscal."The deal size is significant and provides visibility given the long tenure. We think that there is a probability that Wipro could win more business from Atco over the next few years. We believe that margins will approximately be around the company average. It is not clear at this stage as to the extent of revenue contribution from this deal in the September quarter," wrote Anantha Narayan and Nitin Jain in a Credit Suisse report.