Czech energy billionaire in talks to buy Atos unit in $2.2B deal

Ailing French IT supplier Atos is looking to complete its 'transformation' by selling off the remaining half of itself to EP Equity Investment for an estimated €2 billion ($2.20 billion).

Atos announced in the middle of last year that it was exploring a restructure via a two-way split of the company, which triggered the departure of the newly appointed CEO Rodolphe Belmer.

This move led to the creation of Eviden (initially called Evidian), a subsidiary made up of the digital, security and big data business operations of Atos; and Tech Foundations, comprised of the datacenter and hosting, digital workplace and business process outsourcing operations of the company.

Now, the group currently still known as Atos said it plans to complete the full separation of Eviden and Tech Foundations by transferring the latter to EP Equity Investment (EPEI), for €100 million ($109 million) plus €1.9 billion ($2.09 billion) of the division's debt.

EPEI is described by Atos as a "recognized and financially strong European industrial conglomerate with a long-term global vision," and is run by Czech billionaire Daniel Křetínský, who is said to be on an investment spree to diversify his assets. Křetínský made his money in the energy sector, as majority owner of Energeticky a prumyslovy holding (EPH), one of the largest energy groups in Central Europe. According to Reuters the Atos agreement would be Křetínský's eighth investment in France, ahead of just two deals in Germany and three in Britain.

The sale has yet to be signed off, however, and the Atos Board of Directors said it has entered into "exclusive negotiations" with EPEI for the proposed sale of Tech Foundations, following an in-depth review of its options.

As part of this planned move, the company said it also intends to strengthen its balance sheet by raising €900 million ($987 million) by selling shares, with a €720 million ($790 million) rights issue for Eviden shareholders that will be underwritten by BNP Paribas and JP Morgan. EPEI is also expected to get a 7.5 percent stake in Eviden as part of the transaction.

This "comprehensive transformation" of Atos has apparently received unanimous support from the Board of Directors, and is planned to be submitted for shareholder approval in an ad-hoc extraordinary general meeting (EGM) sometime in calendar Q4 2023, for both the transaction and the capital increases.

If all goes well, the entire sale is expected to be completed in Q4 2023 or by Q1 2024 subject to final agreements and the usual financial and regulatory conditions.

Following the divestment, it is expected that the remainder of Atos will be renamed Eviden SE, while the Tech Foundations part will retain the Atos brand, in a move that is guaranteed not to be confusing at all.

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The Atos leadership team hailed this announcement as "a critical milestone in delivering the in-depth transformation of the group," and said that as Eviden, Atos will aspire to be a global leader in digital transformation with "full strategic flexibility and enhanced capital structure to further accelerate its development."

Tech Foundations stakeholders, meanwhile, will "benefit from the backing and long-term vision of EPEI to fully implement its transformation and repositioning" as a standalone, private company, the team said.

For the rest of 2023, Atos/Eviden said it is aiming for an acceleration of organic growth compared with last year and claimed it "has the ambition" to reach 7 percent annual growth over the 2022 to 2026 period and 12 percent operating margin by 2026.

Megabuyte principal analyst James Preece pointed out that the planned move is actually the reverse of the original Atos plan, which was to restructure into two units (Eviden and Tech Foundations) and maximize shareholder value by then spinning out Eviden.

"In the event, it swatted away various private equity and trade interests but is now recommending an offer that values the legacy infrastructure-focused business at a relatively meagre 3.9x EBITDA but more importantly retains the relative crown jewel in Eviden," he said in a statement.

The transaction and balance sheet restructuring will enable Atos/Eviden to improve cash generation, pay down debt, and capitalize on long-term growth trends across the digital, cloud, cyber security and advanced computing markets, Preece claimed.

"Meanwhile, the unenviable task of executing on the multi-year Tech Foundations turnaround plan lies in the hands of seasoned value investor Křetínský, away from public market eyes," he added.

Atos also announced that Paul Saleh is joining as Chief Financial Officer, taking over from Nathalie Sénéchault, who is leaving the company after taking over as CFO last year. Saleh was previously the CEO of healthcare outfit Gainwell Technologies. ®