France willing to buy key Atos assets to keep them French

Finance minister says government has interests in IT giant's 'sovereign activities'

The French government has tabled an offer to buy key assets of ailing IT giant Atos after the company late last week almost doubled its estimate of the cash it will need to stay afloat in the near future.

Atos confirmed on Monday that it has received a non-binding letter of intent from the French state to acquire certain assets from its Big Data & Security (BDS) business. Specifically, these are its Advanced Computing, Mission-Critical Systems, and Cybersecurity Products.

The Paris Stock Exchange-listed biz said in an update today that an indicative valuation of the assets pegged them somewhere between €700 million ($750 million) and €1 billion ($1.07 billion). A due diligence phase will begin shortly in anticipation of a confirmatory non-binding offer by early June.

France's Minister of Economics and Finance, Bruno Le Maire, said in an interview with news channel LCI that Atos is involved in IT projects for the military and other parts of the state, so the government was keen to ensure these did not fall under the control of foreign-owned entities.

"I submitted this weekend a letter of intent with a view to acquiring all the sovereign activities of Atos," Le Maire said, in order to prevent strategic activities from "passing into the hands of foreign players."

In particular, Atos is the integrator behind supercomputers used for France's nuclear deterrent, as well as a key participant in AI and quantum computing projects, and a provider of cybersecurity services.

Atos welcomed the letter of intent, and reiterated that this would protect the sovereign strategic imperatives of the French state.

One French politician called last year for the nationalization of the "sovereign activities" of the Atos group, but the French finance ministry denied at the time that the government was considering any such move.

Le Maire told LCI he hoped "the state would not be alone" and that the government's move would rally other "French sovereign players" to take a stake in the troubled IT giant, saying this could mean companies operating in the fields of defense or aeronautics.

According to the Financial Times, Dassault Aviation, which builds France's Rafale fighter jets, has previously expressed interest in some Atos assets, while defence electronics group Thales could be another potential participant.

Airbus confirmed in January that it was in discussions with Atos over the purchase of BDS but pulled out in March.

The French government's letter of intent provides for an exchange of information and global offers in the context of the group's financial restructuring plan until July 31 or the conclusion of a global restructuring agreement.

Last week, Atos said its refinancing proposals had been postponed to May 3 to allow stakeholders time to incorporate new information, with July still the final target date to reach an agreement.

But in its market update issued today, Atos said it now believes it will need €1.1 billion ($1.2 billion) to fund the business over the 2024-25 period, compared with the €600 million ($643 million) previously estimated. This is to be met in the form of debt and/or equity from existing stakeholders or third-party investors.

Today's update also revised down its estimated revenue for Atos Group for this year from the €9.9 billion ($10.6 billion) previously communicated to €9.8 billion ($10.5 billion), representing a decline of about 3.3 percent compared with 2023, the company said.

The key parameters of its financial restructuring framework are not affected by the letter of intent, Atos claimed. If an agreement is reached with the French state, it does not expect to see the proceeds from the transaction before the second half of 2025. However, such proceeds would be available for early repayment of potential new money instruments as part of the financial restructuring package, it added.

IDC's European senior research director for the Enterprise Infrastructure unit, Andrew Buss, said it is understandable that the French government, which relies heavily on some key Atos technologies, wants to ensure it can keep it under French control.

"I would think of this as an early and pre-emptive shot across the bows to warn investors that certain critical Atos technology will not be freely available. It is also worth bearing in mind that the technologies under offer here are a quite minor part of the company's overall business and revenues," he said.

Omdia chief analyst Roy Illsley described it as a smart move by the French government in light of the adoption of AI and the concept of AI sovereignty.

"France is 80-90 percent nuclear powered, which means while other nations are trying to identify how they are going to meet the energy demand while shutting carbon-intensive power generation, the French have the power," he told The Register. "So securing the capability to develop the technology and become more self-reliant would not be a bad thing in these uncertain times."

However this offer from the French state is by no means certain to happen.

"The expectation is that Atos will successfully manage to refinance to the agreement of creditors and stakeholders once the current uncertainties under the management changes work their way out, so this looks like a fallback plan to activate as necessary," Buss said. ®

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