Atos Pushes On With $5.1 Billion Gemalto Bid After Rebuff

(Bloomberg) -- Atos SE is pressing forward with its unsolicited bid to buy Gemalto NV even after the security-software maker’s board unanimously rejected the 4.3-billion-euro ($5.1 billion) offer.

Atos’s offer “significantly” undervalues the company, Gemalto said in a statement late Wednesday in which it also cited doubts about strategic rationale, uncertainty about integration and insufficient guarantees that a deal would go through to the end. Atos in response reaffirmed it wants to do the transaction and maintained its terms, effectively giving its approach a hostile turn.

Gemalto is “best positioned to grow successfully on a standalone basis and create long-term value for its stakeholders, including its shareholders,” the Amsterdam-based company said. Atos said a few hours later it’s going ahead with its 46 euro-a-share cash offer and is confident Gemalto’s board will engage in discussions.

There are questions about how Gemalto can manage to defend itself after a particularly rough year, during which its shares suffered a March cut in outlook, an April warning that demand from U.S. banks was dipping, a July announcement of an impairment charge, and a delay in September in presenting a new strategic plan.

‘Opportunistic’ Bid

“We are today facing a low point for Gemalto stock; this is obvious,” Chief Executive Officer Philippe Vallee said Thursday in a Bloomberg Television interview. “The approach of Atos is opportunistic. That’s smart on their side, but we need to defend ourselves.”

Vallee said he may address investors sooner than planned about Gemalto’s prospects by moving forward the Capital Markets Day scheduled for March 13 in New York. That’s when the company is expected to present a new strategic plan for the coming years.

Gemalto rose 1.8 percent Thursday to 47.9 euros as of 9:05 a.m. in Amsterdam, above the Atos bid price, in a sign that some investors expect a higher offer. Before surging this week, the stock had fallen 41 percent this year through Friday. Atos’s share price fell 2.3 percent to 130.6 euros.

Atos unveiled the bid on Monday and said it wants to create a European leader in cybersecurity, digital technologies and payment services. “The offer has received strong support from the financial markets, investors and the analyst community since announcement,” Atos said in its statement Wednesday.

SIM Cards

For years, Gemalto has sought to shift away from its declining legacy business of SIM cards for phones and bank cards, which still makes up about a fifth of sales, to focus instead on software. That paid off under Olivier Piou, the company’s previous chief executive officer, with the shares trading at about 60 euros when he announced his retirement last year.

Challenges intensified after Vallee took over in September 2016, as it became clear that the company had overestimated the pace at which customers would shift to new technologies, especially the transition to chip-and-PIN bank cards in the U.S.

An acquisition of Gemalto would be the largest for Atos since the company was formed in 1997 from the merger of two French companies, according to data compiled by Bloomberg. Atos has made several acquisitions in recent years to enter new regions and add a broader range of products. Gemalto was formed from the combination more than a decade ago of companies in France and Luxembourg. It’s run from France though it’s incorporated in Amsterdam.

The deal wouldn’t be without risk. While buying Gemalto would reinforce Atos’s offerings in cybersecurity, online payments and connected objects, there are questions about what would become of the SIM card business. Atos Chief Executive Officer Thierry Breton said he would seek “industrial partnerships” to help turn it around.

“The deal is potentially accretive, but it generates important risks,” analysts at Invest Securities wrote in a note Wednesday. “These are two companies with different businesses with debatable complementarity.”

©2017 Bloomberg L.P.