Atos may sell national security activities to French government

Atos may have found a way to alleviate its ongoing debt problems: The French government has offered to pay up to €1 billion ($1.07 billion) for the part of its business handling contracts vital to national security, but stops short of full nationalization of the company.

French Minister of Finance Bruno Le Maire said that the government had manifested its interest in acquiring all of Atos’ sovereign activities. “The goal is for strategic activities to remain under French control,” he said in an interview late Sunday with French TV channel LCI.

The government’s non-binding offer comes as Atos seeks to raise over $1 billion in new funding to keep it afloat through the end of next year. But investors aren’t exactly rushing to help. Atos had set a deadline of April 26 for new and existing stakeholders to make it an offer, but at the last minute was forced to extend it by a week, to May 3. The company revealed the government offer on April 29.

The struggling IT services company has been shopping around various parts of its business in a quest to raise funds and help it pay off its debt, but a succession of deals have fallen through over the last year.

The biggest of those was a plan to split the company in two, selling the legacy managed infrastructure services business to EP Equity Investment, but that collapsed in February 2024. Various explanations have been offered for the failure of that deal, including that the French government was concerned it could leave vital state interests in foreign hands, or that the parties couldn’t agree on how much of Atos’s debt EPEI would take on.

Sovereign strategic imperatives

Another deal fell through when European aircraft manufacturer Airbus abruptly abandoned a plan to pay Atos €1.8 billion for its entire big data and security division. It’s part of that division for which the French government has offered between €700 million and €1 billion, specifically the advanced computing, mission-critical systems, and cybersecurity products activities, which represented around two-thirds of the division’s €1.5 billion revenue in 2023.

Among the services Atos provides for the French government are supercomputing facilities for the maintenance of France’s nuclear deterrent, and the development and maintenance of mobile IT systems to its defense forces.

Atos welcomed the offer, which it said will “protect the sovereign strategic imperatives of the French State.”

The government offer could also restore customer confidence in Atos after a year of turmoil during which, in addition to its struggle to secure funding, the company has seen a succession of CEOs come and go.

That confidence was clearly lacking in Q1 of 2024, with revenue down 2.6% compared to a year earlier, as customers delayed contract decisions or reduced the scope of work they handed to Atos. Worryingly, the decline was sharper (-3.9%) in the supposedly higher-growth Eviden half of the company’s business, which focuses on more modern IT services such as big data and digital transformation.

The legacy managed infrastructure services half of the company, Tech Foundations, also saw revenue decline, but only 1.5%. However, its book-to-bill ratio dropped to 47% from 68% a year earlier, suggesting that customers are reluctant to make long-term commitments even for the maintenance of business-critical legacy infrastructure.

After failing to sell both Tech Foundations and its big data division, Atos CEO Paul Saleh has had to create a new go-to-market plan for the combined businesses.

Having only taken over in January, he said the transformation of the company’s digital and Tech Foundations activities is continuing, and blamed poor Q1 performance on “softer market conditions in key regions such as the Americas and Central Europe, as well as delays in contract awards.”