When Elliott’s After You, Don’t Give It Ammunition

(Bloomberg Opinion) -- Elliott Management Corp.’s activist attack on Capgemini SE’s lowly 3.6 billion euro ($4 billion) bid for rival IT consultancy Altran Technologies SA is getting help from an unusual source: the bidder. Capgemini’s recent statements about the deal may merely be an incentive for Altran shareholders to sit tight.

The target’s investors need to feel some fear if they’re to accept the 14 euros a share offer before it closes in late January. In particular, they need to be afraid that if they say no, Altran shares will fall a long way below the bid price. Such worries were already being eased by the fact that the market, and Altran’s peers, have climbed since the takeover was launched in June.

But comments by Capgemini’s chief executive officer Paul Hermelin have only reinforced the idea that there’s little downside to rejecting the offer. In a recent interview, he drew attention to a fairness opinion commissioned by the Altran board which concluded the company was worth about 13 euros a share. That’s hardly going to make shareholders feel an urgent need to take 1 euro a share more.

Now look at the commitments that Capgemini has had to make in relation to a legal action against the bid brought by a shareholder lobby group. The hearing for this won’t take place until March, so it’s possible Capgemini could by then have received the minimum 50.1% acceptances it is seeking. Capgemini has said that if it lost the case, so the offer was cancelled, it would relaunch the bid making the necessary fixes. That’s not to say any fresh takeover attempt would be at more than 14 euros a share, but shareholders would certainly gain fresh leverage to demand more.

Of course, some Altran shareholders may dislike the offer and yet feel compelled to accept for fear of being stuck in a minority if their fellow investors gave Capgemini those minimum acceptances. Hermelin has himself eased such concerns by indicating that a simple majority holding would be sufficient to enable Capgemini to harvest financial benefits from Altran. In that case, minorities who stayed on board would be compensated as they would enjoy the value creation. And Capgemini has promised minority shareholders the chance to change their mind and accept the offer in March anyway.

It’s all grist to Elliott’s mill and the hedge fund naturally exploited the opportunity to play back Capgemini’s statements against the French company’s own offer on Wednesday. Capgemini’s bid may be the only one on the table, but right now the alternatives to accepting it don’t appear terribly frightening.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

©2020 Bloomberg L.P.