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Looks Like Paris, Feels Like Wall Street

Chris Hughes
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Looks Like Paris, Feels Like Wall Street

(Bloomberg Opinion) -- Something unusual is happening in France: Two pillars of its business establishment are behaving in a way that looks almost American.

Thierry Breton, the boss of Atos SE and former finance minister, on Wednesday unveiled a plan to hand most of the fintech firm’s shares in Worldline SA to its own stockholders.

Empire building has become empire pruning. A deal like this isn’t the kind of shareholder-friendly move usually associated with members of the CAC 40. Atos will demerge a little less than half of its 51 percent holding, freeing Worldline to pursue its own destiny without a controlling parent. Investors pushed Atos stock up as much as 10 percent on Wednesday, boosting the company’s market value by 820 million euros ($937 million). The stock to be distributed to Atos shareholders is worth about 2 billion euros. Its value clearly hadn’t been fully appreciated.

Deliberate shrinkage remains rare, even if Paris-based Luxury group Kering SA did something similar last year with the demerger of most of its stake in Puma SE. Shareholders are more used to moves like Axa SA’s pricey takeover of XL Group Ltd., which pulverized the acquirer’s share price, and Cie de Saint-Gobain’s ill-judged attempt to acquire Switzerland’s Sika AG.

Breton could have sold the Worldline shares on the market, raising proceeds to build a war chest for acquisitions. Shareholders would hardly have applauded that.

The only downside is that Atos cedes control without getting a premium. In reality, any serious bidder would want to buy 100 percent of Worldline rather than just Atos’s stake, and this transaction doesn’t change the fact that it would have to pay up to do so. Moreover, a bid for Worldline doesn’t look immediately likely. Private equity may have been consolidating the sector, but a deal would cost about 11 billion euros after adding a premium. That is quite a mouthful for a leveraged buyout firm.

Breton will be left with a smaller Atos that may nevertheless be worth more if the company’s increased focus encourages investors to value the shares at a bigger multiple of earnings.

Atos’s move came a day after Denis Kessler, the chairman and CEO of reinsurer Scor SE, called in the lawyers to sue failed bidder Covea Group and its boss Thierry Derez. The announcement has all the fury of U.S.-style litigation and the targets even include Rothschild in Paris.

The jury is out on whether this ruckus is actually good for shareholders. Kessler may have prevented Covea from gaining creeping control without paying a suitably large premium. It is an anchor shareholder in Scor, and an agreement not to increase its stake was due to end this year. Nevertheless, Kessler risks encouraging shareholders to apply a discount to the stock if is he perceived to be a block to any future takeover.

These events may all just be a coincidence. But something is changing when billionaire Vincent Bollore is being pushed around in Italy, activist Elliott Management Corp. has parked its tanks outside Pernod Ricard SA, an acquisitive company shrinks, and the establishment turns on itself.

To contact the author of this story: Chris Hughes at chughes89@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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