IT services company Atos has lost its chairman over a dispute about plans to sell its legacy managed infrastructure services business as it prepares for an IBM-style split between faster- and slower-growing activities.\n\nAtos says the deal is still on \u2014 but after its chairman Bertrand Meunier resigned last week following a legal challenge from an activist investor, the company pushed back the timetable for closing the deal by three months.\n\nThe deal will spell an end to the current one-stop shop for IT services that it offers its enterprise customers, but will free up capital and cash-flow for it to invest in more modern activities: digital transformation, smart digital platforms, cloud technology, cybersecurity, high-performance computing and AI.\n\nIBM spun out its legacy managed infrastructure services business as a new company, Kyndryl, in November 2021, seeking to become a faster-moving and more profitable company focused on modern technologies.\n\nThat strategy appealed to the management of Atos, a major European player in the IT services market with a history almost as long as IBM\u2019s, and in July 2022 Atos announced its own plan to split, spinning off its less profitable activities including data centers and hosting; the digital workplace; unified communication and collaboration; and business process outsourcing.\n\nAtos had planned to divide into two publicly listed companies, but on August 1 announced it would take taking a different route, saying it was close to selling its legacy business, known internally as Tech Foundations, to EP Equity Investment, a Luxembourg-based firm controlled by Czech billionaire Daniel Kretinsky. EPEI is expected to pay \u20ac100 million (about $110 million) for business, provisionally named TFCo during the transition, and to take on \u20ac1.9 billion of Atos\u2019 corporate debt, thus valuing the deal at around \u20ac2 billion.\n\nThat change of plan did not please some of its minority investors. One of them, CIAM, had publicly Atos executives of providing insufficient information to shareholders, settling for too low a price, and having a conflict of intersts. It filed suit against Meunier in mid-October, prompting his resignation.\n\nOn October 16, 2023, Atos named one of its independent directors, Jean-Pierre Mustier, as its new chairman, and said the sale of TFCo to EPEI was still the most realistic way to separate the two halves of the business and improve its risk profile.\n\nHowever, it said, it may need to renegotiate some financial aspects of the deal, which it now expects to close in the second quarter of 2024, not the first. If the deal with EPEI falls through, it will have to consider the sale of other assets or seek other sources of finance to meet debts falling due in 2025.\n\nNew name\n\nUnder the pan introduced in August, Kretinsky will take over TFCo and also the Atos brand, which the legacy business unit will have exclusive rights to. The parent company, meanwhile, will adopt the name Eviden, a variant of the Evidian brand previously used for its security products.\n\nEPEI has little experience managing technology companies. The closest thing in its portfolio is a stake in Aareal Group, a bank that has an ERP software subsidiary, Aareaon, which provides digital solutions for the European property industry. Its other investments include minority stakes in national postal services, supermarket chains, consumer electronics stores and a French TV network.\n\nAtos is looking for a clean break between the two halves of its business, and has spent the last year allocating staff to one part or the other.\n\n\u201cThere are no synergies today between both divisions,\u201d Nourdine Bihmane, Atos co-CEO in charge of Tech Foundations, said in a conference call to discuss the EPEI deal. \u201cWe can create a lot of value through our focus on the most attractive markets.\u201d\n\nBihmane also announced the appointment of a new group CFO, Paul Saleh, a veteran of Sprint Nextel, CSC and DXC Technology.\n\nSaleh explained how Eviden plans to raise capital to develop its business after the Tech Foundations sale. The company is planning a new share issue to raise \u20ac900 million in fresh capital, \u20ac218 million of which will come from EPEI, and also hopes to raise another \u20ac400 million from the sale of non-core assets. It has already raised \u20ac700 million this way over the last year.\n\nDeclining market share\n\nPhilippe Oliva, Atos co-CEO in charge of Eviden, outlined how the company plans use that capital, growing revenue by 7% annually through 2026. That\u2019s ambitious given Eviden\u2019s recent performance, but somewhat underwhelming given the much higher growth rate of 11.7% that the company forecasts for the total addressable market it in which it operates.\n\nIn effect, Oliva is planning on losing market share.\n\nAs for that recent performance, Atos reported financial results for the first half of 2023 last month.\n\nRevenue from Tech Foundations totaled \u20ac2.92 billion for the half-year, down 3.3% from \u20ac3.02 billion a year earlier. Eviden\u2019s revenue for the half year was \u20ac2.63 billion, up 3.5% from \u20ac2.54 billion. It also had the healthier operating margin, 5.3% compared to Tech Foundations\u2019 2.5%.\n\nOverall, the company\u2019s revenue for the half year remained almost flat at \u20ac5.55 billion; its net loss increased slightly to \u20ac600 million, from \u20ac503 million a year earlier.\n\nNext steps\n\nAtos still needs shareholder approval for the sale of TFCo to EPEI, for which it will call an extraordinary general meeting in the fourth quarter, and clearance from its banks and regulators, which it expects to receive in early 2024.\n\nOnly then will Eviden be able to go ahead with its new share issue to raise capital to develop its business, executives said.\n\nSaleh, drawing on his prior experience as CFO at CSC and DXC, explained that the Eviden\u2019s digital and cybersecurity activities would offer a relatively quick return on that working capital, while expanding the high-performance computing business will involve tying up infrastructure investments over longer periods.