IT services firm Wipro has bagged a $1.2-billion outsourcing deal from Canadian utilities major ATCO.

As part of the deal, which is spread over a 10-year period, Wipro will be taking over the IT subsidiary of ATCO — ATCO I-Tek — in an all-cash deal of $195 million, according to a statement released by the company.

ATCO I-Tek has been providing IT Services to ATCO for the past 15 years, and with this acquisition, Wipro gets 550 employees of whom 500 will be in Canada and 50 in Australia.

The Alberta-based ATCO Group is one of Canada’s leading companies, with revenues of $16 billion and 9,800 employees.

Second acquisition This is the second acquisition by Wipro in this segment. In 2011, it acquired the oil and gas IT practice of US-based Science Applications International Corp (SAIC) for $150 million (₹670.5 crore) in an all-cash deal.

The ATCO deal, according to Wipro executives, is expected to close by the end of the July-September quarter.

Part of the revenues from this acquisition will start reflecting in this quarter itself, said Jatin Dalal, Chief Financial Officer for the IT Business.

As a part of the deal, Wipro will manage IT infrastructure, maintain and develop software applications, help ATCO reduce costs in its business, according to Anand Padmanabhan, Chief Executive, Energy, Natural Resources and Utilities, Wipro, who spearheaded the deal.

Boost for verticals The deal will boost Wipro’s energy, natural resources and utilities business, which accounted for 16.2 per cent of its topline at the end of the March quarter. The Americas contributed 50 per cent of Wipro’s business. The acquisition, Dalal said, will not have much of an impact on margins and reiterated that the company had cash reserves of $2 billion at the end of the 2014 fiscal year.

Other IT majors have also been active in acquiring the assets of captive companies. TCS acquired Citigroup’s Indian captive unit for $505 million in 2008, immediately after the bankruptcy of Lehman Brothers.

Cognizant acquired banking major UBS’ Indian captive, taking on 2,000 employees.

“IT modernisation, rethinking on legacy technologies (such as mainframe computing) and focusing on core businesses are some of the factors prompting these companies to sell,” said Sundararaman Viswanathan, Manager – Consulting, Zinnov.

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