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

Billionaire hedge fund manager Chris Hohn has demanded that the world’s largest plane maker Airbus abandon its bid for a stake in the cyber security arm of French IT company Atos, suggesting the deal is politically motivated.

The intervention from Hohn comes just days after Atos said it had received an indicative offer from Airbus for a 29.9 per cent stake in Evidian, one of the two companies being formed by the break-up of Atos. Evidian offers cyber security, big data and cloud computing solutions.

In a letter sent on Monday to Airbus chief executive Guillaume Faury, Hohn, whose fund TCI is one of the plane maker’s largest shareholders, said that the proposed deal appeared to be a “bailout of Atos, a company that is burdened with unsustainable levels of debt and other liabilities”.

Referring to a press release issued by Atos on February 16 confirming the talks with Airbus, Hohn 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,” the letter added, noting that TCI 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 a more than 3 per cent stake in Airbus and has been a shareholder since 2012, has 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,” Ben Walker, partner at TCI, told the Financial Times. “This looks like a politically motivated bailout.”

Airbus has in the past acted as a custodian for French government interests. It held a stake in Dassault Aviation for close to two decades.

Alongside disclosing receipt of a bid from Airbus, Atos said last week that it would also continue to talk with other potential suitors. Last June, Atos announced that it was considering splitting itself into two separate companies after a period marked by heavy losses.

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.

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

The critique from TCI, which has $40bn in assets, comes after analysts questioned the strategic rationale of 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 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”.

Hohn also hit out at Airbus’s governance, saying the proposed transaction “reflects poorly on the board’s decision-making and the company’s government”.

Management should be “totally focused on fixing the supply chain and delivering aircraft rather than being distracted 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 it from Airbus’s core business, which for the first time in 20 years looks to be in good order,” Hohn added.

Airbus, along with US rival Boeing, has been hit by persistent supply chain issues coming out of the coronavirus 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.

Questioning the deal, Chloe Lemarie, aerospace analyst at Jefferies, wrote 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.”