Two months after it informed the stock market that it was weighing up its strategic options, Atos Origin has confirmed it had received expressions of interest but no binding offers, and that it had terminated all discussions with third parties. The final bidders are reported to have included PAI Partners, and a consortium of Permira and Eurazeo.
Speculation over the company’s future had driven Atos Origin’s up 18% since the beginning of this year to close at 53.5 euros when they were suspended last Friday, but they fell more than 13% to 47.28 euros on the Paris bourse yesterday, giving the company a market capitalization of 3.2bn euros ($4.3bn).
The company also said that sales in the first quarter rose 2.5% on a constant scope and currency basis to 1.44bn euros ($2bn), which it believes puts in course to meet its objective of 8.5% top line growth in 2007. But while sales were up 5.6% on an organic basis in the Netherlands, they were down by 1.1% in France and 1.3% in the UK.
Atos Origin said it would push ahead with the 270m-euro ($366m) business plan that it unveiled in February which is aimed at accelerating organic growth and improving its profitability. As part of that, it has raised its 2009 target for growing its headcount based in low-cost offshore locations to 8,000 from 6,100.
Our View
Atos Origin is not the first IT services vendor to turn down an approach from private equity – ACS and CSC have both walked away from negotiations in the last 18 months after failing to be impressed by the sums that were being discussed.
But it may not be the end of the interest from the investment sector in Atos Origin, particularly if forthcoming results fail to impress. ACS is in fresh talks over a leveraged buy-out led by founder and chairman Darwin Deason after last year’s stock option scandal put it on the back foot. Some analysts suggest that Capgemini may also be tempted to make an approach for its domestic rival after the latest fall in its stock market valuation.
The decision not to sell does put renewed pressure on Atos CEO Bernard Bourigeaud to deliver on the company’s transformation plan that it revealed earlier this year, after problems at its UK operation caused it to post a net loss in 2006, and left it vulnerable to approaches from suitors.
And turning things around will not be easy. On a positive note, the company has avoided uncertainty developing among its clients by reaching a quick decision on its future ownership, and it also said on an analysts call that it had resolved problems on three out of four problem contracts and was in the process of implementing most of the steps it talked about in the plan.
But Atos Origin’s sales were down in two of its three key territories during the first quarter, including in the relatively robust French market, while a 6.3% organic fall in consulting revenue shows that it is also missing out in what is currently one of the stronger areas of services spending.
The company said it is making good progress in offshoring, with its recruitment in India 20% ahead of schedule in the first quarter. However, Atos Origin has been slower than its domestic rival Capgemini to build up its global sourcing network, and in order to meet its increased offshore headcount target, it may decide to follow in Cap’s footsteps and use an acquisition as a way of gaining scale in a location such as India.
