Citi Comments On Wipro's Acquisition of SAIC's Commercial Business Services Unit

Wipro WIT has signed an agreement to acquire the Global Oil & Gas IT practice of the Commercial Business Services unit of Science Applications International Corporation SAIC, for an all-cash consideration of around $150 million, subject to adjustments. As a result around 1,450 employees will transition to Wipro across North America, Europe, India and Middle East. According to the management, the revenues from this unit would be around $188 million on a trailing twelve-month basis, margins are low double digits, and the transaction would be EPADR-accretive from day one. The transaction is expected to close in 1QFY12 subject to customary conditions and regulatory approvals. Wipro management's objective is to bring the margins of this business to the company level over the next two years. The transaction should add to the capabilities of Wipro's Oil & Gas practice, which has been one of the faster-growing segments of the company. Wipro remains one of Citi's top picks in Indian IT. Citi has an $11.38 PT on WIT WIT closed Friday at $14.93