France’s Atos entrée heads for fuzzy denouement

Deterrent. The French government warned for months that Atos would not be allowed to sell its defence and security business to a foreign buyer. In the absence of a bona fide French acquirer for the unit of the debt-laden information technology group that manages France’s nuclear codes, the country is stepping in to buy the assets itself. That’s a good idea, but maybe not one with much of a financial return.

President Emmanuel Macron’s government intends to buy about two-thirds of Atos’s Big Data and Security (BDS) business. The French Treasury values the assets, accounting for roughly 10% of Atos’s total revenue, at an enterprise value of between 700 million euros and 1 billion euros. That’s not exactly a bargain.

The acquired assets account for two-thirds of BDS revenue. Assuming they represent the same level of the division’s earnings, it would value the government’s acquisition at almost 15 times this year’s operating profit at the midpoint of the valuation range mentioned. That is not cheap for a company that has been struggling for years, with a share price that’s lost 97% of its value in the last four years. Thales and Dassault Aviation, the French defence companies that may be part of the future consortium of industry buyers, trade at around 16 times on the same metric.

Atos creditors may feel relieved. They are locked in talks to discern how a company with a 225 million euro market capitalisation can restructure 4.9 billion euros of net debt. The injection of state funds in the second half of 2025 should help, as will removing the uncertainty of what will happen to Atos, which can now look for a buyer without state meddling.

The investment may not be a great money maker. While the purchase price is minimal relative to France’s 2.4 trillion euro public debt burden, the deal implies that the state can convince private players to buy the assets at a future date. That’s not guaranteed. Airbus, which expressed interest a few months ago, is not deemed French enough to manage nuclear codes because its defence arm is headquartered in Germany. Thales was turned down a few years ago by Atos’s then-management when it wanted to buy the BDS division. Orange was interested in BDS’s cybersecurity business but not the rest of the assets.

None of the above are likely to now overpay for assets whose value may have been affected by the declining morale of its engineers. The French state has many means to pressure its national champions of the defence and telecommunication industries. But in this case it may have to accept that its investment is essentially strategic.