Indian outsourcer Wipro is acquiring the oil and gas IT services practice of the Commercial Business Services business unit of Science Applications International Corporation (SAIC).
Wipro said on Friday that it is acquiring the business for an all cash consideration of about US$150 million, subject to unspecified adjustments.
Indian outsourcers are looking for acquisitions that will either bring them horizontal expertise, or deep domain expertise and clients in the industry verticals that they are focusing on, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm in Pune, India.
The acquisition of SAIC's oil and gas practice will give Wipro access to customers in government and the public sector, Apte said. SAIC also bundles its services with high-quality intellectual property, which will now be available to Wipro as it addresses the oil and gas sector, he added.
SAIC is selling to Wipro its U.S. oil and gas IT services business along with subsidiaries located in the U.K., France, India, and the Middle East that are predominantly focused on the oil and gas market. These operations employ about 1,450 persons who will move to Wipro.
The sale of these operations will enable SAIC to better focus on its strategic growth areas, including market segments in the energy sector, such as smart grid, renewable energy implementation, and energy efficiency, where it has built its business through organic growth and acquisitions, SAIC said.
To grow its oil and gas IT services business would have required investments in areas outside SAIC's strategic focus, including increasing its off-shore capabilities, the company said.
Wipro is India's third largest outsourcer. For the quarter ended Dec. 31, Wipro reported revenue growth in its IT services business that was lower than that of its peers in the Indian outsourcing industry like Infosys Technologies and Tata Consultancy Services. Following the lackluster results, the company said in January that it would replace the joint CEOs of its IT business with a single chief executive.
The completion of the acquisition of SAIC's oil and gas IT practice is subject to customary closing conditions and regulatory approvals, Wipro said. A Wipro spokesman said it hopes to complete the acquisition in the current April-June quarter.