Atos on the brink as restructuring talks break down

Preferred consortium walks away from Atos rescue bid

Talks over a rescue deal for French IT services firm Atos have broken down after its preferred consortium withdrew from talks earlier this week.

Atos had opened talks with a consortium led by services firm Groupe Onepoint, which included Butler Industries (parent company of Butler Capital Partners), and self-styled ‘digital contractor' Econocom. The proposal would have meant an infusion of cash for Atos amid a five-year restructuring plan – with shareholders being almost completely wiped out.

Around €2.9 billion of corporate debt would been converted to equity, and €1.5 billion of new loans would be issued, including €300 million in bank guarantees and €250 million to help ease current cashflow concerns. After this, shareholders would have been left with less than 0.1% of the company's share capital.

The consortium has been tight-lipped over the reasons for the failure of the talks, releasing a brief statement: "Despite the tremendous commitment of Atos employees and the resilience of the Group's clients, the Onepoint, Butler Industries and Econocom consortium found that the conditions were not ripe to reach an agreement paving the way for a lasting solution to the financial restructuring and implementation of the One Atos project.

However, a consortium led by Czech billionaire Daniel Křetínský is prepared to re-open talks with the company. Negotiations with the billionaire over the spin-off of managed services business Tech Foundations broke down in March this year after incoming Atos chairman, Jean-Pierre Mustier, sought to wring a higher price out of Křetínský.

Separately, Atos claimed that it has the support of the French government to protect the country's "sovereign interests", using EU laws enabling governments to protect businesses deemed to be in the national interest to circumvent claims of protectionism. The French government liberally takes advantage of this loophole, for example, protecting yoghurt maker Danone from takeover by PepsiCo in 2006.

Under the terms of this separate deal, the French government acquired governance rights over supercomputer manufacturer Bull SA, which Atos acquired in 2014, and the right to acquire it outright should a third party acquire 10% or more in terms of either shares or voting rights. An outright acquisition of Bull by the French government would net Atos a welcome €700 million.

Atos is also selling Worldgrid, an IT integrator specialising in real-time data systems for the utilities sectors, to engineering consulting group Alten; and is attempting to offload its big data and cybersecurity wing to Airbus.

Should the worst come to the worst, IT companies across Europe are waiting in the wings to pick over the choiciest parts of the troubled firm.

The financial difficulties besetting Atos are also a major embarrassment for Thierry Breton, the European Commissioner for the Internal Market, who was CEO of Atos from 2009 to 2019.

He is arguably the architect of Atos's current difficulties. Under his leadership, Atos acquired a series of companies at excessively high prices, such as US-based outsourcing specialist Syntel ($3.4 billion), as well as Xerox's IT outsourcing business (just over $1 billion). It also scooped up the husk of the French ‘national champion', Bull SA, in 2014.

Amid all this expensive acquisition activity, the company only recognised the business and growth potential of the cloud too late.

After Breton's departure, Atos attempted to conduct a series of asset sales in a bid to reduce the debts built-up during his era in charge, but these efforts have been undermined by the revolving door in the CEO's office, which has seen the company burn through four CEOs in under two years.