LONDON (Reuters) – France’s Atos has adopted a bidding approach of over $ 10 billion for rival U.S. DXC Technology in what would have been the largest acquisition ever by a business-hungry IT consulting group, two sources familiar with the matter said.
Atos, who is working with advisors on a takeover bid for the former Hewlett Packard Enterprise business, took a formal approach to the New York-listed DXC this week, sources told Reuters on condition of anonymity.
The French firm, led by CEO Elie Girard, estimates DXC at over $ 10 billion including debt, the sources said.
Atos and DXC did not respond to requests for comment. A bond with DXC would increase Atos’ presence in the United States, giving it access to a wide range of B2B customers and products, including cloud analytics and applications, as well as IT outsourcing services.
Discussions are still in an early stage and there is no certainty that a deal will be agreed, the sources say.
DXC shares were up 8% to $ 28.50 in pre-market trading in New York, while Atos fell 6.4% after the Reuters report, making it the worst-performing stock in the Paris SBF index. 120.
If successful, a combination with DXC would lead to synergies and cost savings for Atos, which has been in an acquisition frenzy in recent years, the sources said.
The French firm spent $ 3.4 billion to buy Michigan-based IT service provider Syntel in a cash deal in 2018, ranking it as its biggest deal to date.
It is now looking to harness investors’ appetite for pandemic resilient assets in technology to strike a deal that would be in the region of its 8.2 billion euro ($ 10.1 billion) market value, the sources said.
DXC, founded in 2017 when Hewlett Packard Enterprise spun off its corporate services business, has been grappling with rising debt, with boss Mike Salvino taking over the helm in 2019 and subsequently announcing a strategic resource review. not core.
“DXC is too small to operate alone in a low margin world,” said one of the sources.
DXC announced Wednesday plans to sell its Fixnetix unit, which provides outsourced front-office services to investment banks, hedge funds and exchanges, to Options. Technology for an undisclosed amount.
It pocketed $ 5 billion last year from the sale of its healthcare technology business to private equity firm Veritas Capital.
The Tysons, Virginia-based firm, which has a market value of $ 6.7 billion, saw its revenues drop to $ 19.6 billion in 2020 from $ 20.75 billion in 2019 while its total debt rose to $ 9.9 billion in 2020 from 7.4 billion dollars in 2019.
Atos recently embarked on a series of impromptu acquisitions, purchasing cybersecurity, artificial intelligence and digital consulting firms in an effort to increase its revenues from 5% to 7% in the medium term.
It bought artificial intelligence and data science firm Miner & Kasch in April and US-based cloud consulting group Maven Wave in 2020, as well as cybersecurity firm IDnomic and energy specialist X-Perion in 2019.
After canceling the 2020 dividend payment in April, Atos said it will maintain its dividend policy and use the remaining free cash flow to fund further acquisitions.
($ 1 = 0.8149 euros)
Reportage by Pamela Barbaglia in London; Additional reportage by Mathieu Rosemain in Paris; Editing by Rachel Armstrong and Alexander Smith