(Bloomberg) — Atos SE shares tumbled the most on record after the company said Chief Executive Officer Rodolphe Belmer would resign just five months into his tenure, following a failure to agree on a potential restructuring that will lead to a breakup of the French IT business.
Atos is studying spinning off its Big Data and Cybersecurity business in a separate entity, while Belmer will leave before September, the company announced at a capital markets day on Tuesday.
Appointed in late January this year, Belmer said he has “no choice but to resign” following this reorganization, according to the statement.
Atos shares fell as much as 27% in early trading in Paris.
“We consider this restructuring will be painful and is unlikely to please investors in the short term,” said Gregory Ramirez, analyst at Bryan Garnier & Co.
A series of setbacks and profit warnings has sent Atos from a market value of 8.2 billion euros ($8.6 billion) at the end of 2020 to 2.1 billion euros today.
The firm was removed from the benchmark CAC 40 index in Paris and auditors uncovered accounting errors at two of the firm’s U.S. entities. The collapse attracted takeover interest. Thales has been studying teaming up with private equity on a potential takeover, Bloomberg reported in February.
“We see several negative elements here,” including the departure of the CEO “who just arrived,” Oddo BHF analysts wrote in a note to clients.
“This may lead to further management changes. Moreover, this means that the team leader who designed the turnaround plan will not be there to carry it out.”
Belmer was appointed chief executive following the unexpected resignation of Elie Girard after a dire series of results.
Previously CEO of Eutelsat Communications SA, Belmer was in charge of reorganizing Atos to focus on cloud-based products.
The reorganization is the board’s “decision,” Belmer said during a call with reporters, refusing to comment on reported disagreements over the company’s strategy.
He will receive nine months salary for his departure, while his contract allowed him to receive two years of pay if leaving before a period of two years after his nomination, he said.
Philippe Oliva has been appointed deputy CEO in charge of the BDS and Nourdine Bihmane deputy CEO in charge of the legacy business.
If Atos goes ahead with its latest restructuring, the new data unit will be listed before the second half of 2023 under the name Evidian, while the ailing legacy IT services unit will continue as Atos.
The two companies will have separate management.
To fulfill the project, Atos estimates total funding needs of 1.6 billion euros for the 2022 to 2023 period, with proceeds expected from the sale of 700 million euros of non-core assets.
After the transaction, Atos shareholders will hold 100% of the restructured company, and 70% of Evidian. The remaining 30% stake in Evidian would be held by Atos.
“We appreciate the ambition but stay cautious on account of the uncertainty associated with a transformation of such magnitude against a challenging wider macro backdrop,” wrote Citi’s Amit Harchandani in a research note.
A near-term sentiment shift for Atos seems unlikely, even after the company’s June 14 announcement that it was contemplating a spinoff of its digital transformation and security services (SpinCo), a move that would effectively isolate the ailing legacy outsourcing unit (52% of 2021 sales).
But tying the security business, which is the crown jewel, to transformation services, which have failed to grow in-line with market trends, could cap SpinCo’s possible valuation upside. And Rodolphe Belmer’s planned departure after just taking over as CEO in January suggests significant internal divisions over the plan, leaving the outlook unsettled.
Tamlin Bason.
analyst at Bloomberg Intelligence
(Updated with context throughout. Shares.)
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