Thales Eyes Purchase Of Atos Cybersecurity Business: Reports

Thales has approached several investment firms including Bain Capital to discuss a joint deal that would have the private equity firms picking up the IT services parts of Atos that Thales isn’t interested in owning.

Thales is putting together a plan to buy Atos’ $1.41 billion cybersecurity business in a move that would break up the beleaguered IT services giant.

The Paris-based conglomerate and its adviser Centerview Partners have approached several investment firms including Bain Capital to discuss a deal that would have the private equity firms picking up the parts of Atos, No. 24 on the 2021 CRN Solution Provider 500, that Thales isn’t interested in owning, Reuters and Bloomberg reported Wednesday. Atos didn’t respond to a CRN request for comment.

Thales said in a statement Wednesday that it’s potentially interested in acquiring any cybersecurity asset that could be for sale but added that no discussions with Atos are underway on this matter. The company has no intention of moving into markets such as global IT services that it doesn’t serve already, according to the Thales statement.

[Related: Atos CEO Vows ‘Swift Turnaround’ After Issuing New Profit Warning]

Atos’ stock is up 0.09 percent to $37.03 per share since the acquisition reports were published, while Thales’ stock is down 0.5 percent to $18.22 per share over the same period. In addition to Bain, Thales’ advisers have also begun talks with CVC Capital Partners and PAI Partners over a possible joint bid for Atos, but the timing of such a move remains unclear, one source told Reuters.

Neither Bain, CVC nor PAI immediately responded to CRN requests for comment.

Bain, meanwhile, would use any joint buyout of Atos to expand its portfolio of tech assets in Europe, where it also controls Italian IT firm Engineering Group, Reuters reported. In such a deal, Thales would buy Atos’ big data and cybersecurity (BDS) arm, while private equity firms would swallow Atos’ $6.99 billion infrastructure and data management and its $4.38 billion business and platform solutions units.

Atos has rebuffed previous overtures by Thales for its BDS business and would view any move by private equity funds to launch a public offer and delist Atos from the Paris Stock Exchange as hostile and unwarranted, a source told Reuters. Similarly, the French government is expected to strongly oppose any break-up of Atos with the country’s presidential elections looming in April, Reuters reported.

The company’s BDS business has enjoyed robust growth in recent years, with revenues climbing to $1.41 billion in 2020, up 15.8 percent from $1.22 billion in 2019. That’s in stark contrast to Atos’ infrastructure and data management and business and platform solutions divisions, which saw sales fall by 3 percent and 7.9 percent, respectively, in 2020.

Atos’ BDS practice has benefitted from an aggressive acquisition strategy, with the company buying Canadian cybersecurity consulting firm In Fidem in January 2021, Austrian consulting provider SEC Consult Group and Netherlands-based company Motiv ICT Security in December 2020, and Reston, Va.-based managed detection and response provider Paladion and Paris’ digital.security in November 2020.

The company had a difficult 2021 under former CEO Elite Girard, who failed in his attempt to acquire Tysons, Va.-based solution provider DXC Technology and disclosed that auditors discovered accounting errors in Atos’ North American division. Then in January, new CEO Rodolphe Belmer warned of a “severe gap” in the company’s 2021 financial results, which sent Atos’ stock to its lowest level since 2012.

On the Thales side, the company’s digital identity and security business saw sales jump to $3.42 billion in 2020, up 17.3 percent from $2.92 billion a year earlier thanks largely to the company’s $5.63 billion acquisition of Amsterdam-based Gemalto, which closed in April 2019. But sales for the sector slumped to $2.41 billion in the first nine months of 2021, down 4.3 percent from $2.52 billion a year earlier.

Thales and Atos went toe-to-toe in late 2017 to buy digital security vendor Gemalto, with Atos entering a $5.05 billion acquisition offer on Nov. 28, 2017, that would have created a cybersecurity, IoT and payments powerhouse. But Thales bested Atos with a $5.63 billion bid on Dec. 17, 2017 that sought to form a cybersecurity business well-positioned to address IoT, cloud and mobile security challenges.