The Ukraine war has revived the threat of conventional conflicts for developed nations. That has boosted the defence sector, in which Airbus participates. But the interest the Toulouse-based group is reportedly taking in the cyber security and big data arm of Atos is incongruous. Cyber warfare is a different activity to the physical sort.
The French software group is the kind of vendor that acquirers like: distressed. But there is a further incongruity in talk of Airbus buying a minority stake in the Evidian division of Atos. It would hardly be material to the aerospace group.
Defence and space activity makes up just over a quarter of Airbus’s top line, though its separate helicopters unit has defence exposure, too. Within defence and space, the software businesses — within connected intelligence — make up an even smaller part.
Diversifications into cyber security are tricky for defence investors to value, as BAE’s purchase of Detica illustrated. Competence and cash flows are harder to assess than in military hardware.
Building jets is Airbus’s main activity. In the nine months to September 2022, this accounted for more than 90 per cent of group operating profits. Airbus has dabbled in software previously via its Skywise project, with US partner Palantir. Not much has come of this so far, says Jefferies.
Perhaps Airbus boss Guillaume Faury believes stake building could pave the way to a purchase of Evidian. Atos chief executive Rodolphe Belmer may have resigned last year because the board resisted a trade sale and favoured a demerger.
Atos has already entertained at least one offer for Evidian. A bid led by consultants Onepoint valued Evidian at €4.2bn, which Atos rejected. That looks low compared with an estimate from Citi of €4.6bn including net debt and pension liabilities.
In its current form, the software group is burning cash flow at an average of €385mn annually through 2025, according to S&P Global estimates. There is a danger Airbus would help fund a rescue if it becomes embroiled with Atos. That would please the French government but harm shareholders.
If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT”, which appears at the top of this page above the headline.