Breakingviews

Capital Calls: French M&A risk makes Atos a tricky short

3 minute read

A woman waves a French flag in Saint-Mande, near Paris, France, May 5 2020. REUTERS/Benoit Tessier

Register now for FREE unlimited access to Reuters.com

LONDON, April 20 (Reuters Breakingviews) - Concise insights on global finance in the Covid-19 era.

------------------------------------------------

BEARS BEWARE. In a world of inflated tech valuations, Atos (ATOS.PA) has proved to be a lucrative exception to the rule for canny short-sellers. The beleaguered $8 billion French IT provider fell by 6% on Tuesday after first quarter sales undershot analyst expectations. It follows a failed approach for New York-listed DXC Technology (DXC.N) and revelations of an ongoing audit into two U.S. units linked to potential revenue misstatements. Such bugbears mean shares have slumped by 23% this year, compared to a 15% rise in the STOXX Europe 600 Technology index.

Register now for FREE unlimited access to Reuters.com

Even so, those still betting against boss Elie Girard should be wary. Including debt, Atos is valued at just over 4 times forward EBITDA, according to Refinitiv data, compared to peer SAP (SAPG.DE) on 17 times. A rock-bottom valuation may attract rivals, particularly those vulnerable to arm-twisting by the French government if it decides to “rescue” a local tech champion. Last November, telecoms operator Orange (ORAN.PA) denied it was working on a takeover. IT consultant Capgemini (CAPP.PA) is another potential suitor. Atos carries risks whichever way one bets. (By Christopher Thompson)

On Twitter http://twitter.com/breakingviews

Earlier in Capital Calls:

U.S. regulatory cloud chocks tobacco stocks, again

read more

Meat giant JBS avoids plant-based indigestion read more

Tencent’s loud ESG pitch may fall on deaf ears read more

SXSW’s partial savior read more

Big Chair emerges from pandemic office shutdowns read more

Register now for FREE unlimited access to Reuters.com
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: <a href="http://bit.ly/BVsubscribe" target="_blank">http://bit.ly/BVsubscribe</a> | Editing by George Hay and Karen Kwok

Breakingviews
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

More from Reuters