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Thales outflanks Atos with surprise 4.76b euro Gemalto Bid

[PARIS] French aerospace specialist Thales SA knocked out Atos SE's unsolicited attempt to buy Dutch cybersecurity provider Gemalto SA, outbidding the rival with a cash offer valued at 4.76 billion euros (S$7.56 billion) that won backing from the target company.

The offer for 51 euros a share comes less than a week after the 46-euro bid by Atos, which Gemalto rejected as "significantly" undervaluing the company. Thales received unanimous support for its overture from Gemalto's board, gaining the upper hand with an offer 11 per cent above its rival in the biggest bet yet for chief executive officer Patrice Caine since he took over three years ago. Atos responded by saying it'll no longer pursue Gemalto, but will remain available to discuss a combination if Thales offer isn't completed.

The surprise appearance of Thales outmaneuvered Atos CEO Thierry Breton, a former French Finance Minister, whose earlier offer got a lukewarm response. Both suitors were drawn by Gemalto's security products that help protect companies and governments against data hacks and identity theft in an increasingly connected world. Thales is the bigger of the two interested companies and has a powerful shareholder in the French state, which owns about 25 per cent and is also the single largest investor at Amsterdam-based Gemalto.

Gemalto CEO Philippe Vallee, who will keep his post under the new owner, said his company was swayed by Thales's financially more attractive offer, "but also the acceleration in our strategy and the overall rationale of the transaction that convinced the board."

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The Gemalto transaction would be Europe's biggest technology deal this year, highlighting how companies are clamoring for online security expertise as data breaches around the world become more prevalent. For Thales, the offer marks a major strategic expansion away from its core business, which covers areas such as avionics equipment and air-traffic management, where Thales is the global leader.

Jobs Retained

Thales said it doesn't expect to cut Gemalto's workforce and has secured a four billion-euro credit facility to fund the transaction. Thales's dividend policy will remain unchanged, it said. The deal needs backing from investors holding at least 67 per cent of Gemalto, the companies said. Thales expects to complete the acquisition, subject to regulatory approval, in the second half of next year.

Gemalto will operate under its own brand as one of the seven global business units at Thales. The new unit would have about 3.5 billion euros in revenue, representing about 20 per cent of Thales's sales. The deal should result in savings through synergies of as much as 150 million euros by 2021, Thales said.

Challenging Past

For years, Gemalto has sought to move away from its declining legacy business of SIM cards for phones and bank cards to focus instead on software. While that paid off for a while, challenges intensified over the past 18 months as it became clear that the company had overestimated the pace at which customers would shift to new technologies.

Gemalto shares have surged 44 per cent since Atos unveiled its offer on Dec 11. The stock is still down about 15 per cent this year, amid a series of profit warnings and operational setbacks.

Lazard, Messier Maris & Associes, and Societe Generale are acting as financial advisers to Thales, while its legal advisers are Cleary Gottlieb Steen & Hamilton LLP and NautaDutilh NV On behalf of Gemalto, Deutsche Bank and JPMorgan Chase & are acting as financial advisers and Allen & Overy LLP and Darrois Villey Maillot Brochier are acting as legal counsels.

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