Picture: ISTOCK
Picture: ISTOCK

Paris — Atos made a €4.3bn unsolicited bid for Gemalto with the backing of the French state’s investment bank, seeking to create a European leader in cyber security, digital technologies and payment services.

Atos is proposing to pay €46 a share in cash, 36% above Monday’s closing price. It called the offer friendly and said it wanted to engage in discussions about a deal, which would be the biggest of the year between two European technology companies.

Gemalto, a security software company that has seen its stock battered this year by a series of profit warnings and operational setbacks, said it was reviewing the proposal, which it described as conditional.

Thierry Breton, the former French finance minister who runs Atos, said the company is "absolutely determined" to complete the transaction, and that it had the backing of Gemalto’s biggest shareholder, state-run investor Bpifrance Financement. A representative for Bpifrance said the fund would not comment on Atos’s bid, but welcomed consolidation of French technology players.

Gemalto’s shares had dropped 38% this year through Monday, after a March cut in outlook, an April warning that demand from US banks was dipping, a July announcement of an impairment charge, and a delay in September in presenting a new strategic plan. Atos, by contrast, had seen its stock jump 24% in the same period.

"We continue to do this on a friendly basis, but we are absolutely determined and we will do this transaction, because it’s good for Gemalto shareholders, because it’s good for Gemalto’s stakeholders and because it’s good for Atos shareholders," Breton said on Tuesday on a call with analysts.

Atos has been on a buying spree in recent years in a bid to enter new regions and add a broader range of products, including in health care. Gemalto’s shift from SIM cards to software and cyber security had initially paid off under Olivier Piou, the company’s previous chief executive officer, with the shares trading at about €60 when he announced his retirement last year.

However, his successor, Philippe Vallee, has faced mounting challenges as it became clear that the company had overestimated the pace at which customers would shift to new technologies, especially the transition to chip-and-PIN bank cards in the US.

Convincing shareholders

Shares of Gemalto climbed 34% to €45.38 at 2pm in Amsterdam. Atos gained 6% to €132.05 in Paris.

Gemalto said it would review the bid and determine the best course of action before responding by Friday. The company has retained Deutsche Bank and JPMorgan Chase as advisers and said there was no certainty the proposal would lead to a firm offer.

While Gemalto is incorporated in Amsterdam, it was formed from the combination more than a decade ago of French and Luxembourg companies, and is run from France.

German billionaire siblings Susanne Klatten and Stefan Quandt, whose investment companies combined own a bit more than 10% of Gemalto, will study the Atos offer "with care and composure", a Quandt family spokesman said in an e-mailed statement. "As significant shareholders, we’re pleased that others too are recognising the technological quality of Gemalto."

The acquisition would be Atos’s largest since it was formed in 1997 from the merger of two French companies, according to data compiled by Bloomberg. Breton said on a conference call with reporters on Monday he had already secured financing from two banks for the deal. Atos would seek "industrial partnerships" to help turn around Gemalto’s troubled SIM business, he said.

"The deal would make sense even if management should give us more details on the strategy going forward and what it would do with some of Gemalto’s assets that could be noncore for Atos," analysts at Kepler Cheuvreux wrote in a note. "Atos should now convince Gemalto shareholders to tender."

Atos gets just 5.7% of its €11.7bn annual revenue from its big data and cyber security division. The French company beefed up its offering when it agreed to buy Siemens’s communications cyber security division in October. Gemalto generated annual sales of €3.1bn in 2016.


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