Troubled tech giant Atos confirmed today that negotiations with the prospective buyer of its legacy IT operation have ended prematurely, coming after the recent cancellation of its rights issue to raise cash.

The Paris Stock Exchange-listed biz disclosed in a market update that talks with Czech billionaire Daniel Křetínský over a potential sale of the Tech Foundations division to his EP Equity Investment (EPEI) company did not reach a successful conclusion.

"Proposed new deal terms and pricing could not be mutually agreed upon," according to Atos, and so the negotiations are over, with no compensation payable by either party.

A sale to EPEI was expected to net Atos an estimated €2 billion ($2.15 billion) in return for the legacy infrastructure services division.

The latest move leaves Atos in a tricky situation, with its plans to restructure the company in disarray and a number of debts adding up to more than €2 billion in payments due next year.

Those plans were to split itself into two separately traded businesses as part of an "ambitious turnaround" effort announced in 2022. The Digital, Big Data and Security (BDS) business lines were grouped into a subsidiary known as Eviden - initially Evidian - while the Atos Tech Foundations (ATF) business line comprised Datacenter and Hosting, Digital Workplace, Unified Comms, and Business Process Outsourcing.

Earlier this month, Atos announced the cancellation of its €720 million ($774 million) rights issue, intended to help the company strengthen the balance sheet by selling shares. The company claimed conditions for it were no longer applicable because of "changes in the market environment."

Atos then appointed an independent negotiator - mandataire ad hoc - to assist in discussions with its banks on a refinancing plan.

The latest plan involves Atos continuing to run Tech Foundations and Eviden as separate businesses with a "coordinated go-to-market strategy," while it continues to consider "strategic options" that are in the best interest of its customers, employees, and shareholders.

The company confirmed to The Register that a sale of Tech Foundations is still part of its divestment plan, but the question now is where a buyer is likely to be found.

"What's not clear at the moment is whether Atos' initial separation plans - that were part of its June 2022 announcement - will come back into play, i.e. to separate Tech Foundations and Eviden into two publicly listed companies," analyst Georgina O'Toole said today.

"Our view is that the turnaround of Tech Foundations has progressed solidly since the split announcement, even with both companies sitting under the same 'roof' so the initial perceived risk of that journey seems less from an operational perspective. However, as things stand, there remains continued uncertainty in terms of Atos' future corporate and financial position," she added.

However, some good news for Atos is that its revenue for financial year 2023 was up, if only marginally, by 0.4 percent to €10.69 billion ($11.5 billion), in line with its own guidance, and that all its bank covenants were met.

The full FY23 earnings release has been rescheduled for March 20 while external auditors complete their work, but Atos said that Eviden revenue was up 2.9 percent to just over €5 billion ($5.4 billion), while Tech Foundations was down 1.7 percent to about €5.6 billion ($6 billion).

Atos is still in negotiations with Airbus about the potential sale of the BDS (Big Data & Security) business to the aerospace giant for €1.5 billion to €1.8 billion ($1.6 billion to $1.96 billion), announced in January.

All eyes will be fixed on how Atos can emerge from this saga, and whether the French government will be forced to step in to help fund any recovery. ®

https://www.theregister.com//2024/02/28/questions_over_atos_finances/