UK hedge fund manager Chris Hohn has demanded jet manufacturing giant Airbus immediately drop its proposed purchase of a stake in the cyber security arm of French IT company Atos.
Hohn — who runs hedge fund TCI, which has assets of $40bn and owns more than 3 per cent of Airbus shares — questioned whether the deal with Atos, one of the world’s largest IT services companies, was politically motivated.
TCI wrote to the Toulouse-based plane maker on Monday to argue against the rationale of buying a 29.9 per cent stake in Evidian, one of two companies being formed by the break-up of Atos. Evidian specialises in offering cyber security, big data and cloud computing solutions.
Atos confirmed last week it had received an indicative offer from Airbus, whose registered headquarters are in the Netherlands, for a minority stake in Evidian, but said it would also continue to talk with other potential suitors. Analysts have questioned the strategic rationale of the deal.
TCI said in the letter addressed to Airbus chief executive Guillaume Faury that the jet maker could continue to have a “mutually productive and profitable relationship with Evidian” without taking a stake.
The transaction, it said, appeared to be a “bailout of Atos, a company that is burdened with unsustainable levels of debt and other liabilities”.
Evidian will incorporate Atos’s digital, big data and security business activities. The business, which has about 60,000 employees and annual revenues of about €5bn, secures communications for France’s military among other customers.
Referring to a press release issued by Atos on February 16 confirming the talks with Airbus, TCI noted that the IT company said the potential transaction would ensure “technological sovereignty in France”.
“This suggests there is some political motivation for Airbus to complete the transaction. Management and the board have a fiduciary duty to act in the best interests of Airbus and its shareholders,” TCI added, noting that it reserved its rights to litigate for damages if the deal went ahead and evidence emerged that it was in part politically motivated.
TCI, which has owned shares in Airbus since 2012, also filed a motion for the manufacturer to answer 16 questions relating to the transaction at its annual general meeting in April.
“We want Airbus to focus on producing aircraft,” said Ben Walker, partner at TCI. “This looks like a politically motivated bailout.”
Airbus has in the past acted as a custodian for government interests. It held a stake in Dassault Aviation for close to two decades.
The activist investor hit out at Airbus’s governance, saying the proposed transaction “reflects poorly on the board’s decision-making and the company’s government”.
Management, it wrote in the letter to Faury, should be “totally focused on fixing the supply chain and delivering aircraft rather than being distracted by this agreement with Atos”.
“The last thing management needs is a new problem child to distract it from Airbus’s core business, which for the first time in 20 years looks to be in good order,” TCI added.
Airbus, along with US rival Boeing, has been hit by persistent supply chain issues coming out of the pandemic, leading to delays in deliveries of aircraft, which have frustrated some of its biggest airline customers in recent months.
Airbus delivered just 20 aircraft in January — its lowest month for deliveries in more than a decade — and last week slowed the production of its best-selling single-aisle aircraft.
TCI has large shareholdings in a series of French industrial companies including engine maker Safran and Vinci, the airport concessions and construction group.
Atos announced in June last year that it was considering splitting itself into two separate companies after a period marked by heavy losses.
“We fail to understand the rationale of taking a minority stake, as it would limit any synergies that Airbus could extract from this,” said Chloe Lemarie, aerospace analyst at Jefferies, in a note to clients last month.
“While we understand the interest in adding cyber security assets within either Airbus or Thales, Evidian, with its 8 per cent margin in 2021 and management target to reach a 12 per cent margin by 2026, appears like a slightly lower-quality asset than both groups.”
Airbus declined to comment on TCI’s letter but said a partnership with Evidian would “create a win-win situation for both companies, strengthening their respective offer and positioning in critical digital and security market segments”.
It would also allow Airbus to “strengthen its digital leadership in the aerospace industry by enabling its long-term digital transformation”.
