Shareholder urges Airbus to drop Evidian pursuit

Bloomberg

Airbus SE should refrain from buying a stake in a division of French software company Atos SE because the purchase would represent an “extremely inefficient” use of funds and distract management at a time when it needs to focus on meeting delivery targets, activist investor Chris Hohn said.
Owning a stake in the Evidian business would expose Airbus to what Hohn called a “low-quality, highly levered company,” alongside the business’s operating losses that could turn out to be material, according to a letter addressed to Airbus Chief Executive Officer Guillaume Faury and posted on the website of Hohn’s TCI Fund.
“The transaction appears to be a bail out of Atos, a company that is burdened with unsustainable levels of debt and other liabilities,” the activist
investor wrote.
Faury said at the annual earnings conference last week that Airbus and Evidian are complementary and share synergies, as the planemaker seeks to expand its cybersecurity expertise. While there’s no agreement yet, Atos’s board has decided to “further engage with Airbus” to conduct due diligence and agree on terms, the group said in a statement.
Hohn faulted Airbus for considering the step at a time when the company needs to get its operations back on track, having consistently missed its delivery targets last year and only handing over a low number of new aircraft in the first month of the year.
“The world is depending on Airbus, so execution of the ramp up must be the overwhelming priority of management,” Hohn wrote. A better use of the Toulouse, France-based company’s cash would be to increase its dividend to shareholders and buy back its “extremely undervalued” stock, he said.
Airbus, which is considering a 29.9% in Evidian, declined to comment on Hohn’s letter but said that a partnership between the two companies would “create a win-win situation” and allow Airbus to “create additional value for its clients and shareholders”. Atos is seeking a valuation of at least €7 billion ($7.5 billion) for the stake it’s selling, Les Echos newspaper reported last week, citing the company’s financial advisers.
Hohn, best known for building stakes in companies and agitating for change to help boost share prices, said TCI is a long-term shareholder of Airbus, with a stake of more than 3% of the shares.