Wipro Buys SAIC Energy Tech Biz For $150M
Wipro Ltd , India's No. 3 software services exporter, on Friday said it would acquire SAIC's global oil and gas technology services business for $150 million in a move that expands it offerings beyond its core of financial services.
SAIC's oil and gas technology business has annual revenue of $188 million and employs 1,450 people in the United States, Europe, India and the Middle East, Manish Dugar, chief financial officer of Wipro's IT unit, said on a conference call.
Wipro's New York shares were up 2 percent in early Friday trade after the deal.
The SAIC unit provides consulting, systems integration and outsourcing services to global oil majors, Wipro said.
The purchase price values the SAIC unit at nearly 6 times earnings before interest, tax, depreciation and amortization (EBITDA). By comparison, iGate's $1.2 billion deal in January for control of Indian outsourcer Patni Computer was valued at about 8 times EBITDA.
"Oil and gas companies are investing in the upstream business while looking at rationalizing cost through IT," said Anand Padmanabhan, senior vice president of Wipro's Energy unit.
Wipro's IT business, which develops software applications, integrates IT systems and manages call centres for clients such as Citi , Cisco and Credit Suisse , accounts for about three-quarters of its revenue.
The acquisition is expected to close by June and will be funded with exising cashflow.
Wipro and Indian rivals Infosys Technologies and Tata Consultancy Services are looking for acquisitions in key segments and geographies in order to expand their service offerings and move up the value chain but have shied away from big-ticket buyouts.
Wipro in February reorganized its key IT outsourcing business in an effort to win more clients, barely three weeks after it surprised markets by removing the joint chiefs of the business and naming company veteran T.K. Kurien as the new chief executive.
Wipro has been struggling to keep up with sector leaders TCS and Infosys in winning large outsourcing contracts. Wipro shares closed 0.5 percent lower at 475.85 rupees in a weak Mumbai market before the deal was announced.