IT services vendor Atos Origin SA has admitted that it has been approached by private equity companies over a possible takeover, but insisted it is yet to receive a firm offer.
Reports in the French business press claimed that buyout specialist Permira and hedge fund Centaurus Capital were discussing a 58 euros ($77) per share bid for Atos Origin, which drove its share price up almost 30% to 51 euros ($67) in trading on the Paris Stock Exchange.
This prompted Atos Origin to release a statement revealing that it had received expressions of interest, but emphasized that no concrete offers have been tabled.
Last October, the company was forced to issue a similar statement after its shares rose 20% on rumors that private equity firm Blackstone Group had approached it with an offer of between 3.4bn euros ($4.5bn) and 3.6bn euros ($4.8bn). The reported Permira/Centaurus offer would value Atos Origin at 4bn euros ($5.3bn).
Private equity companies are taking a growing interest in the IT services sector, attracted by the cash flows that large outsourcing contracts generate, as well as the potential for them to act as consolidators in what remains a highly fragmented market. Several major services firms including Computer Sciences Corp and ACS Inc have received approaches in the last 18 months.
Atos Origin is vulnerable, with 100% of its stock freely traded after former stakeholders Schlumberger and Philips divested their holdings during the last three years. The company’s valuation was hit by two sales warnings last year due largely to problems at its UK and Italian operations, and last month it unveiled a three-year, 270m-euro ($357m) plan aimed at improving its profitability and organic revenue growth.
In the full year ending December 31, 2006, the company made a loss of 264m euros ($349m) compared to a profit of 235m euros ($310m) in 2005 – due largely to an impairment charge of 378m euros ($499m).
The company’s revenue rose 1.5% at a constant scope and exchange rate to 5.4bn euros ($7.1bn), which ranked it as Europe’s second largest listed services vendor behind domestic rival Capgemini with sales of 7.7bn euros ($10.1bn). Crucially, Atos Origin’s operating profit margin dropped to 4.6% from 7.3%, which saw it fall behind the identical margins of 5.8% posted by Capgemini and UK competitor LogicaCMG last year.
The increase in Atos Origin’s shares price had a knock-on effect to its peers, with Capgemini up 5%, Nordic vendor Tietoenator Corp up 4% and LogicaCMG rising 3% in trading on Thursday.