Capgemini’s acquisition of Altran in trouble?

/ September 8, 2019/ Altran, Capgemini, France, M&A (large, with revenues above $50m), News

Capgemini’s proposition of Altran for EUR 14 per share is getting more complicated.

Several shareholders, including PE funds Elliott, are challenging the price offered by Capgemini. The shareholders (indirectly) mandated a firm, Sogerm Evaluation on the price. Sogerm concluded the EUR 14 per share is too little and believes the right price falls in the EUR 15.3-EUR 19 range per share.

Meanwhile, Capgemini reiterated that its offer represents a 30% premium to Altran’s average stock price in the past thirty days.

Capgemini’s planned acquisition of Altran is not yet in trouble. As per law requirements, Altran mandated a third-party organization to evaluate Capgemini’s offer. The opinion of this third party, Finexi, will be instrumental in the success of Capgemini’s offer.

At this point, we think the situation is in a classic business battle.

On one side, Capgemini is indeed offering a 30% premium to Altran’s stock price. Also, Capgemini will be taking over EUR 1.4bn in net debt from Altran. Still, we think Capgemini is getting a good deal for Altran, the world’s leader in ER&D services, and also a vendor that has completed its offshore transition with Aricent.

On the other side, Elliott is (apparently) the most powerful activist fund, with a strategy of buying (relatively small numbers of) shares of undervalued firms and shaking its management. No doubt is Altran’s situation a golden opportunity to make easy money for Elliott.

The outcome from this battle between Capgemini and Elliott is uncertain. Elliott is being clever about its strategy and going through Adam, a French well-known organization, in theory, claiming to be defending rights of minority shareholders. Capgemini is being realistic about the damage potential of Elliott and is only targeting to win 50.1% of Altran’s shares.

We should have more visibility about the success of both parties when Finexi releases its opinion about Capgemini’s offer. Probably in two weeks.

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