French IT services group Atos confirmed it has made a friendly offer for US competitor DXC Technology. Atos said the combination could create a digital services leader benefitting from global scale, talent and innovation. DXC Technology also confirmed the approach, saying its board of directors will be evaluating the proposal.
Neither of the companies provided any financial details about the offer, which sources put at over USD 10 billion, according to Reuters. The sources noted talks were still at a preliminary stage but that the deal could create synergies and cost savings for Atos.
DXC Technology was started in 2017 when Hewlett Packard Enterprise spun off its enterprise services business. “DXC is too small to operate on its own in a low margin world,” one of the sources said. The company recently unveiled plans to sell its Fixnetix unit, which provides outsourced front-office trading services to investment banks, hedge funds and exchanges among others, to Options Technology for an undisclosed amount. It sold its healthcare technology business to private equity firm Veritas Capital last year for USD 5 billion.
The company, based in Virginia, has a market value of USD 6.7 billion. Revenues for 2020 fell to USD 19.6 billion from 20.75 billion the year before while total debt lifted to USD 9.9 billion from 7.4 billion.
Atos, meanwhile, has been on a buying spree in a bid to grow its revenues by 5-7 percent in the medium term. It bought artificial intelligence and data science firm Miner & Kasch in April and US-based cloud consulting group Maven Wave in 2020, as well as cybersecurity firm IDnomic and energy specialist X-Perion in 2019. After cancelling its 2020 dividend payout in April, Atos said it would maintain its dividend policy and use remaining free cash flow to finance further acquisitions.
