Atos enters talks for split and acquisition by equity firm

The acquisition would see its Tech Foundations business entirely sold to EP Equity Investment

French reseller giant Atos has entered negotiations to sell its Tech Foundations (TFCo) business to EP Equity Investment (EPEI).

The acquisition would result in the effective separation of Atos' Eviden (formerly Evidian) and TFCo and the strengthening of the Group's capital structure.

The sale would also produce a net cash positive impact of €0.1bn (£0.086bn) and the transfer of €1.9bn (£1.63bn) of on-balance sheet liabilities, leading to an enterprise value of €2.0bn (£1.72bn).

TFCo will continue using Atos brand and will become its sole owner.

"In consistency with our announcements of June 2022, we have decided to present to our shareholders vote, the separation of the group through the divestiture of TFCo, our legacy business, together with its liabilities," said Bertrand Meunier, chairman of the Atos board of directors.

"This will create value for our shareholders by both taking away the risk of TFCo's turnaround and its various liabilities and refocusing Atos on Eviden and its good future growth prospects. We will hold an Investor Day on Eviden before our shareholders' vote."

Atos' leadership team, Nourdine Bihmane, Diane Galbe and Philippe Oliva, also added: "Following the sale of TFCo, Atos would become Eviden and TFCo stakeholders would benefit from the backing and long-term vision of EPEI to fully implement its transformation and repositioning.

"We are delighted with today's announcement and are really looking forward to writing the next chapter of both TFCo and Eviden with our employees, customers and all our stakeholders.

"This transaction will unlock new opportunities for the employees of both TFCo and Eviden.

"We welcome EPEI's full support to TFCo's management and employees."

The announcement comes just as Atos shares sank 20 per cent earlier last week following its Q2 results which showed operating income in decline.

The French reseller has also been on a divestment journey in order to calibre balance sheets - the latest divestment being the sale of EcoAct to Schneider Electric.

Unlocking Eviden's potential

The company claimed the transaction is designed to ensure Eviden's growth and a continuation of commercial operations on both sides.

As of December 2022, Eviden had €5.3bn (£4.55bn) revenue, of which 72 per cent was in digital activities and the remainder in BDS.

Eviden delivered 7.0 per cent organic growth and 5.3 per cent operating margin in H1 2023 and benefits from a solid commercial traction, as evidenced by the 119 per cent book-to-bill in Q2 2023.

Following the split, Eviden would carry out its own transformation, and position itself for growth and cash generation.

This is in line with its current strategy, focused on fast-growing markets and higher-margin activities, supported by the strengthening of the Group's capital structure and focus on deleveraging.

Eviden's medium-term ambitions are to accelerate organic growth (vs 2022) and improve the operating margin (also vs 2022).

Eviden aims to reach 7 per cent annual growth over the 2022 and 2026 period and c.12 per cent operating margin in 2026.

Atos is planning to conduct the applicable employee consultation processes and seek consent from its concerned bank creditors before entering into any final agreements at a date expected by the end of 2023.

The transaction is therefore expected to be completed by Q4 2023 or Q1 2024.