France to shield Atos cybersecurity assets after Airbus abandons deal

It is the second time in a year that Airbus has axed proposals to buy assets of debt-laden Atos after it declined to make an offer for a minority stake in a broader business a year ago following a backlash from its own investors. The failure adds to mounting pressure on Atos, which specializes in spy-to-AI assets deemed strategic by the French government, after profit warnings, a revolving-door of CEOs and the collapse of another potential asset sale.

France said on Tuesday it would protect the strategic assets of Atos after planemaker Airbus pulled the plug on a deal to buy the ailing French IT conglomerate's cybersecurity assets. The latest setback for Atos, which came just weeks after the collapse of a deal to raise urgently-needed cash through the sale of another part of the business, sent its shares down 19.16% to a record-low closing price of 1.7380 euros.

"All of France's interests will be protected. (Finance Minister) Bruno Le Maire will use all the means at his disposal to guarantee the protection of strategic activities", the French finance ministry said in a statement. Atos secures communications for the French military and secret services and manufactures servers to make supercomputers able to process troves of data for research or to develop the nascent artificial intelligence industry.

"With regard to Atos' sensitive activities, in particular Big Data & Security, the French government will come up in the coming weeks with a national solution for the protection of strategic activities", the finance ministry added. It is the second time in a year that Airbus has axed proposals to buy assets of debt-laden Atos after it declined to make an offer for a minority stake in a broader business a year ago following a backlash from its own investors.

The failure adds to mounting pressure on Atos, which specializes in spy-to-AI assets deemed strategic by the French government, after profit warnings, a revolving-door of CEOs and the collapse of another potential asset sale. "The failure of this sale process poses both a liquidity problem ... and a problem regarding debt restructuring," said Oddo BHF analyst Nicolas David.

The two companies announced the collapse of talks for Airbus to buy BDS, including big data activities, in brief statements. Atos said it was "evaluating strategic alternatives that will take into consideration the sovereign imperatives of the French state".

Airbus said it had taken the decision "after careful consideration of all aspects of a potential acquisition" but gave no further details. A person familiar with the matter said it had concerns over complexity and broader turmoil surrounding Atos, while others said the move came as a shock to the IT firm. 'POLITICAL DEAL'

Airbus investors appeared relieved after the European aerospace group - no stranger to political machinations among its founding nations including France - sidestepped what some had feared would be a politically-inspired rescue. Shares in Airbus rose about 1.8%.

Without the deal, which had been valued at 1.8 to 2.0 billion euros, Airbus has more scope to return cash to shareholders as it rides high against Boeing in the jet market. "We had seen the deal as a negative for Airbus, given concerns that this might be a political deal, and its negative impact on buyback potential," Jefferies analyst Chloe Lemarie wrote.

Atos, formed partly by acquisitions under former CEO Thierry Breton, the EU industry chief and a former French finance minister, has deep links to France's security world in which the state has the ultimate say over tie-ups. Founded from pan-European mergers, Airbus is headquartered in France but its defence arm is mainly weighted towards Germany despite close ties to Paris over nuclear weapons and ballistics.

There was no comment from Atos' leading shareholder, Onepoint. Some industry sources suggested the spotlight would now fall on Thales as a potential buyer, even though the French defence electronics group has repeatedly rebuffed the idea.

A spokesperson said on Tuesday it was "not interested" in BDS and was fully focused on its recent Imperva acquisition. Thales has said it has no intention to diversify beyond its core areas of aerospace, defence and digital identity systems.

Atos has seen its shares plummet over the last two years after missteps including a badly received takeover plan for U.S. rival DXC in 2021. In February, talks with Daniel Kretinsky over the sale of Atos' legacy operations collapsed, although some reports suggest the Czech billionaire is considering a fresh bid.

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