India-based information technology consulting firm Wipro Ltd. has signed a deal with ATCO Ltd., a structures and logistics company in Alberta, to purchase the Canadian company’s IT services arm.
The all-cash $210 million acquisition also comes with an IT outsourcing deal. Under the agreement, Wirpo, the third largest IT services firm in India, also gets to provide total IT outsourcing solutions to ATCO’s facilities in Canada and Australia for $120 million annually for the next 10 years or up to December 2024.
“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 chief financial officer, ATCO. “Wipro’s deep domain capability and technology-leadership will also ensure we continue to deliver cost-effective services to our customers.”
The decision to outsource ATCO’s IT services was due in part to increasing regulatory challenges faced by ATCO’s utility companies when applying to the Alberta Utilities Commission to include IT costs, provided by ATCO I-Tek, for recovery in customer rates, according to a statement from ATCO.
“By competitively outsourcing its IT services, ATCO is addressing the concerns expressed by the Alberta Utilities Commission,” the stetement said.
ATCO has more than 9,800 employees and assets of approximately $16 billion. The company provides services business solutions worldwide with leading companies engaged in manufacturing, logistics and noise abatement, pipelines, natural gas and electricity transmission and distribution, power generation, natural gas gathering, processing, storage and liquids extraction and business IT systems solutions.
Wipro is a leading information technology, consulting and business process services company. The company has a workforce of over 140,000, serving clients in more than 175 cities across six continents.
ATCO’s IT services division ATCO I-Tek ATCO I-Tek has been providing IT services for the past 15 years.Wipro is buying the division. It has a strong presence in Australia and North America.
Wipro wants to buy the division strengthen its own IT services business in those regions.
The sale is expected to close in the third quarter of 2014 subject to customary closing conditions. Aggregate proceeds from the sale are expected to be approximately $210 million.
“We are delighted to collaborate with ATCO in this transformational initiative. Our focus will be to enable ATCO to enhance their competitiveness by deployment of strategic solutions and efficient delivery of IT services,” said Anand Padmanabhan, chief executive – energy, natural resources and utilities, at Wipro. “We are confident that our domain expertise combined with the enhanced talent pool will help us support ATCO’s growth.”
“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,” he added.