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Hedge fund boss Chris Hohn calls for Airbus drop deal with Atos cyber spin-off

Hedge fund boss Chris Hohn calls for Airbus drop deal with Atos cyber spin-off

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Billionaire hedge fund manager Chris Hohn has demanded that the world’s largest planemaker Airbus drop its bid for a stake in French IT firm Atos’ cybersecurity arm, suggesting the deal is politically motivated.

Hohn’s intervention comes just days after Atos announced it had received an indicative offer from Airbus for a 29.9% stake in Evidian, one of the two companies created by Atos’ break-up. Evidian offers solutions for cybersecurity, big data and cloud computing.

In a letter sent on Monday to Airbus CEO Guillaume Faury, Hohn, whose fund TCI is one of the planemaker’s largest shareholders, said the proposed deal appears to be a “bailout for Atos, a company burdened with unsustainable amounts of is debts and other liabilities”.

Referring to a February 16 Atos press release confirming talks with Airbus, Hohn noted that the IT company said the potential transaction would ensure “technology sovereignty in France”.

“This indicates that there is a 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,” the letter added, noting that TCI reserved the right to sue for damages should the transaction go through and provide evidence to support it emerged that she was partly politically motivated.

TCI, which owns more than 3 percent of Airbus and has been a shareholder since 2012, has also requested that the manufacturer answer 16 questions related to the transaction at its annual general meeting in April.

“We want Airbus to focus on making planes,” Ben Walker, partner at TCI, told the Financial Times. “This looks like a politically motivated bailout.”

Airbus has historically acted as a trustee for the interests of the French government. It was involved with Dassault Aviation for almost two decades.

In addition to announcing it had received an offer from Airbus, Atos said last week it would continue to talk to other potential suitors. Last June, Atos announced that it was considering splitting into two separate companies after a period of heavy losses.

Evidian will integrate Atos’ business activities in the areas of digital, big data and security. The company, with around 60,000 employees and annual sales of around 5 billion euros, secures communications for the French military, among others.

In his letter, Hohn said the jetmaker could continue to have a “mutually productive and profitable relationship with Evidian” without taking an equity stake.

The criticism from TCI, which has $40 billion in assets, comes after analysts questioned the strategic rationale for the proposed transaction.

Airbus declined to comment on Hohn’s letter, but said a partnership with Evidian would “create a win-win situation for both companies, strengthening their respective offerings 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.”

Hohn also criticized Airbus leadership, saying the proposed transaction “poorly reflects the decision-making of the company’s board and government.”

Management should be “completely focused on fixing the supply chain and delivering aircraft, rather than being sidetracked by this agreement with Atos,” the hedge fund manager noted in the letter.

“The last thing management needs is a new problem child to distract them from Airbus’ core business, which appears to be fine for the first time in 20 years,” Hohn added.

Airbus, along with US rival Boeing, has been hit by ongoing supply chain issues related to the coronavirus pandemic, causing delays in aircraft deliveries that have frustrated some of its biggest airline customers in recent months.

Airbus delivered just 20 planes in January – the lowest month for deliveries in more than a decade – and slowed production of its best-selling single-aisle aircraft last week.

TCI holds major stakes in a number of French industrial companies, including engine maker Safran and Vinci, the airport concession and construction group.

Chloe Lemarie, an aerospace analyst at Jefferies, questioned the deal, writing in a note to clients last month: “While we understand the interest in having cybersecurity assets within Airbus or Thales, Evidian with its 8% margin in Adding 2021 and management’s target of reaching a 12 percent margin by 2026 seems like a slightly lower quality asset than either group.”

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