Siemens is set to take an initial 15 per cent stake and a board seat in Atos Origin, the IT services group run by a former French finance minister, in a rare Franco-German deal that will create one of Europe’s largest IT outsourcing companies.
Europe’s biggest engineering group by sales announced late on Tuesday that it would inject its lossmaking computer services unit into Atos Origin to create Europe’s second-largest IT services group behind IBM.
The move comes at a highly sensitive time for Franco-German industrial relations, after the French government tried to block a contract for Siemens’ high-speed trains awarded by Eurostar, the operator of the train service through the Channel tunnel between France and the UK. The issue has sparked strong protests from Berlin.
The decision to allow Siemens to take a stake and a board seat in a group that provides strategic IT services to France’s 58 nuclear reactors may help to assuage these tensions.
The Atos Origin deal, valued at €850m ($1.1bn), is the biggest Franco-German transaction since an alliance between Germany’s premium carmaker Daimler and France’s Renault early this year.
It will see Siemens hand over its ailing SIS unit in exchange for a 15 per cent stake, plus a €250m convertible bond that can be transferred into another 5 per cent of Atos’s shares, and a €186m cash payment. Siemens has made a binding commitment not to sell its shares in the next five years.
The deal will allow Siemens to offload one of its two problem units, the other one being NSN, its telecom infrastructure joint venture with Finland’s Nokia. Peter Löscher, Siemens’ chief executive, has concentrated the company on the healthcare, energy and industrial sectors while disposing of non-core areas such as telecoms and computing.
The deal marks a significant step in the turnround strategy of Thierry Breton, the former finance minister who was brought into Atos Origin two years ago.
Mr Breton has more than halved debt and is hoping to expand the IT services business into new markets such as smart electricity grids and meters.
The acquisition of SIS will see Atos almost double sales from last year’s €5.1bn to €8.7bn. Roughly half of the enlarged Atos’s sales will now be generated by outsourcing.
But the division will also require further restructuring. SIS made a €463m loss in the fourth quarter and Siemens is currently shedding 4,200 of the unit’s 35,000 jobs. Atos is set to cut another 1,750 jobs at SIS.
The group will aim for an operating margin of 6 per cent in 2011 and 7 to 8 per cent in 2013. Atos’s operating margins last year were 5.7 per cent.
Siemens and Atos will also form a “strategic partnership” where each company will invest €50m into joint software research and development projects.