|15 January, 2020

Capgemini blinks first in Elliott face-off

Capgemini Chief Executive raised an offer for Altran Technologies after previously insisting he would do no such thing

The logo of Cap Gemini is seen at the entrance of the company headquarters in Paris, France, February 18, 2016. REUTERS/Charles Platiau

The logo of Cap Gemini is seen at the entrance of the company headquarters in Paris, France, February 18, 2016. REUTERS/Charles Platiau

LONDON - The medieval Italian philosopher Niccolo Machiavelli viewed a promise as a necessity of the past and called a broken pledge a necessity of the present. Capgemini Chief Executive Paul Hermelin is proving similarly flexible. The boss of the $21 billion French IT consultant on Tuesday raised an offer for Altran Technologies after previously insisting he would do no such thing. Swallowing his pride may not, however, get him what he wants.

Hermelin increased Capgemini’s bid to 14.50 euros per share from 14 euros before a Jan. 22 deadline for Altran shareholders to tender their shares. He also raised the stakes by promising that, if he didn’t win a majority of shares, Capgemini wouldn’t make another offer for at least 18 months. And to top it off, he said Capgemini could fulfill its so-called "intelligent industry" ambitions through other strategic initiatives if its offer didn’t work out.

Both companies agree that a deal in which Capgemini supplies the IT consultants and Altran provides the engineers to build the factories of the future makes sense. But Hermelin’s bravado is unlikely to cut much ice with Elliott Advisors, which owns nearly 15% of Altran and has previously refused to tender its stake in the company for what it views as a low-ball price.

The U.S. activist has in the past cited research suggesting Altran should be valued at around 17 euros per share. Such a large bump up from the 14-euros-per-share offer made in June 2019 – at the time a one-third premium to Altran’s volume-weighted average share price over the previous three months – isn’t going to happen. And Hermelin’s concession shows he knows that sealing a deal which makes so much strategic sense is more important than saving face. But the additional 130 million euros he is offering may not win over enough investors.

If the bid fails, Altran shares will inevitably fall. A year and a half is potentially a long time to wait for the return of such a suitable mate. But that’s another Capgemini promise which could yet be tested.

CONTEXT NEWS

- French consulting and IT services company Capgemini on Jan. 14 raised the price of its offer for Altran Technologies to 14.50 euros per share, compared with a previous offer of 14 euros.

- Capgemini said Altran shareholders had until Jan. 22 to tender their shares and that it would not further increase the offer price, which it said was “best and final”.

- Altran shares were down by 0.3% at 14.04 euros by 1630 GMT on Jan. 14. Shares in Capgemini were up by 2.1% at 114.35 euros.

(Editing by Swaha Pattanaik, Karen Kwok and Amanda Gomez)

© Reuters News 2020

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