Shares of the struggling French IT firm Atos plummeted on Monday as the company deliberates between two rescue deals, both expected to lead to significant dilution of existing shareholders.
Market Reaction
By 12:19 p.m. London time, Atos shares had dropped by 17.71%, reflecting investor anxiety over the impending decision. The sharp decline in share price underscores the market’s concern over the future of Atos and the potential impact of the restructuring deals on shareholder value.
Two Rescue Proposals on the Table
The two restructuring deals under consideration are led by Czech billionaire Daniel Kretinsky and key Atos shareholder David Layani. Atos is set to choose between these proposals by Wednesday.
“The implementation of the proposals will result in all cases in a massive dilution of the existing shareholders of Atos SE,” Atos stated on Monday. This announcement has left shareholders bracing for significant changes in their equity positions.
Financial Creditor Support
Atos is working with financial creditors to secure maximum backing for one of the deals by June 5, aiming for a final restructuring agreement by July. This support is crucial for ensuring the chosen restructuring plan has the necessary financial foundation to succeed and help stabilize the company’s precarious financial situation.
Background on the Proposals
Kretinsky had previously engaged in talks with Atos about purchasing parts of its business, which ultimately fell through. Layani’s IT consulting firm Onepoint held over 11% of Atos’ share capital and voting rights as of December 2023, indicating a significant stake and interest in the company’s future.
The current proposals are the culmination of a months-long search for restructuring options. Initially, four proposals were posted on Atos’ website in May. These included offers from Kretinsky’s EP Equity Investment in collaboration with investment firm Attestor Limited, Layani’s Onepoint with investment company Butler Industries, Atos’ financial creditors, and U.S. private equity firm Bain Capital.
Atos rejected Bain Capital’s proposal, while the company’s financial creditors allied with Layani. The remaining two proposals from Kretinsky and Layani represent the final options for Atos as it seeks a viable path forward.
Failed Acquisition Talks
These deals follow a series of unsuccessful discussions regarding the complete or partial acquisition of Atos. Airbus was among the companies that engaged in these talks, highlighting the broad interest in Atos’ assets and operations.
In April, Atos received a letter of intent from the French government, indicating a potential interest in acquiring parts of its business. At the time, the firm mentioned a non-binding offer could be made by early June. On Monday, Atos noted that due diligence on this deal was still in progress, adding another layer of complexity to its restructuring efforts.
Strategic Importance
Atos holds several crucial contracts with French authorities and the military. The company is also responsible for managing data and cybersecurity for the Paris 2024 Olympic Games, underscoring its strategic importance to national infrastructure and security.
Financial Struggles
Atos has been grappling with severe financial issues, including escalating debt. By the end of the first quarter, the company reported in April that its net debt stood at 3.9 billion euros ($4.2 billion). The mounting debt has compounded the firm’s financial instability, making the need for a successful restructuring even more critical.
Looking Ahead
As Atos nears its decision, shareholders brace for the inevitable dilution, while the market watches closely to see which proposal will steer the company towards stability. The upcoming days will be pivotal for Atos, as the chosen restructuring plan will determine the company’s trajectory and its ability to overcome its financial challenges.
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