Gemalto just says no to Atos

Digital security vendor Gemalto has taken little time to reject an unsolicited takeover bid from Atos on the grounds that it’s rubbish.

Scott Bicheno

December 15, 2017

8 Min Read
Gemalto just says no to Atos

Digital security vendor Gemalto has taken little time to reject an unsolicited takeover bid from Atos on the grounds that it’s rubbish.

Specifically Gemalto is citing the fairly standard range of objections: bid too low, more value to shareholders from potential organic growth, etc. Despite the initial indication that this unsolicited bid was somehow ‘friendly’, it doesn’t seem to have been received as such by the Gemalto board.

“In 11 years, we have turned Gemalto into a technology blue-chip, recognized in over 180 countries throughout the world,” said Philippe Vallée, Gemalto CEO. “In 11 years, the company has created 5 000 jobs. In 11 years, Gemalto has become the world leader in digital security.

“We have taken the measure of the recent changes in our historical markets, taken the responsible decisions and are now focused on leveraging the many opportunities of our fast-growing markets.

“We will soon be presenting to our stakeholders our ambitious and substantial development plan for the company that will focus on the next generation of digital security for companies, governments and citizens worldwide.

“Gemalto’s employees, its Board of Directors, its management team and I are fully aligned and committed to achieving the success of this plan that will benefit our stakeholders, including all our shareholders.”

Gemalto has provided a fairly detailed set of rationale for rejecting the bid, which seems reasonably convincing and is reminiscent of Qualcomm’s rejection of Broadcom’s overtures. Atos is now faced with the same choice of whether to go hostile or walk away. You can see the full rebuttal in the Gemalto letter to Atos, copied below.


Mr Thierry Breton

Chairman and CEO

Atos S.E.

River Ouest

80 quai Voltaire

95877 Bezons Cedex


Amsterdam, 13 December 2017


Dear Mr Breton,

We refer to your letters dated 27 November, 8 December and 11 December 2017, as well as to your announcement of 11 December 2017.

The Board (the Board) of Gemalto N.V. (Gemalto or the Company) has, together with its financial advisors Deutsche Bank and J.P. Morgan and its legal advisors Allen & Overy and Darrois Villey Maillot Brochier, carefully reviewed and considered your unsolicited and conditional proposal for a possible recommended offer for all issued and outstanding shares of Gemalto N.V. as set forth in your letters and in the draft framework for a merger protocol that you sent in parallel to your letter of 8 December 2017 (the Proposal).

Consistent with its fiduciary duties, the Board has reviewed and discussed whether your Proposal is in the best interests of the Company, its business, employees, shareholders and other stakeholders. After thorough consideration the board has unanimously come to the conclusion that this is not the case. In the review by the Board, leading to this conclusion, the following is particularly relevant.


We believe that Gemalto – the world leader in digital security – is best positioned to grow successfully on a standalone basis and create long term value for its stakeholders, including its shareholders. As you note in your investor presentation, we have a unique technology platform that allows us to support our clients’ digital security needs across multiple high-growth markets. We are well advanced in transitioning our business towards the higher growth Government, Enterprise, Cybersecurity and Machine-to-Machine end markets. We have grown organically significant businesses in On Demand connectivity platforms for mobile operators and in Authentication as a Service platforms for online services access. The board is confident that Gemalto management will deliver the already announced transition plan and the Company is best positioned to deliver long term value given its current capabilities and positioning. Our transition plan is well underway and will allow us to be more agile and nimble and better serve our clients’ needs going forward.

Your Proposal is unclear as to critical elements of the combined strategy, integration approach and impact on Gemalto, particularly because it lacks a detailed explanation of operational structuring and synergy potential. Gemalto is organized to benefit from innovation across our business units and we believe the potential break-up and contribution to three separate divisions (for example the integration of the payments business into your independent and publicly listed subsidiary Worldline) could negatively impact the propagation of our most advanced technologies and our ability to best serve our clients.  Moreover, we think that there will be significant challenges in combining our businesses in the short term which are not addressed in your proposal. Finally, the synergy framework outlined in your presentation is very high level.


The Board considers that the Proposal significantly undervalues the Company and is not reflective of the intrinsic value and prospects of Gemalto.

The timing of your Proposal is opportunistic, seeking to take control of the Company at a price that represents a discount of 27.4% vs. our last 12-month high and a premium of only 3.5%[2] vs. our 12-month average share price and at the time when the Company has stabilised its performance following a challenging period.

As mentioned, our business mix today is transitioning towards attractive growth activities such as Government, Enterprise & Cybersecurity and Machine-to-Machine, which together accounted for over 55% of our Q3 2017 reported revenue and grew at over 20% year-on-year.  Such businesses, especially at scale, are very scarce and of high strategic value. The impact of this transition is yet to be fully reflected in the Company’s share price and our strategy and positioning around these growth segments will be further detailed during our forthcoming Capital Markets Day.

Your proposed offer price of EUR46 per share corresponds to a valuation which does not reflect our leadership positions in these faster growing segments, and is well below the valuation levels of companies involved in highly strategic Government and Security activities.

In addition, we would expect any Proposal to adequately reflect a fair sharing of synergies accruing from a transaction, which you have indicated you believe to be substantial.

Deal certainty

The Board considers that your Proposal does not provide adequate deal certainty, given the significant conditionality attached to it, and given the execution risks involved in the transaction envisaged by your Proposal. In particular, your Proposal does not contain a substantiated explanation on, and analysis of, the envisaged anti-trust clearance procedures, timing, risks and potential remedies you would be prepared to offer to ensure completion of the contemplated transaction. The same applies in respect of any other regulatory clearances that may be required, such as CFIUS. In addition, your draft framework for the merger protocol contains a number of off-market, unclear, unusual and unacceptable terms and conditions, that give further serious concerns on deal certainty.


Importantly, the Board concludes that your Proposal is not sufficient in addressing the interests of the Company, its business, employees, shareholders and other stakeholders.

We are continually developing our business in response to the constantly evolving needs of our customers, with whom we develop innovative solutions through trusted and long-term relationships. Our business is key to the governments and citizens that we serve in the area of data security, data privacy and confidentiality.

We put a strong focus on developing solutions that help tackle some of society’s major challenges, ranging from financial inclusion to efficient and accessible health and welfare services. We continuously maintain significant commercial and technical investments, as we believe these will contribute over the long-term to the progress of the mobile and digital society for our customers and for citizens. For example our investments contribute to the continuous global interoperability of mobile telephony systems and card payment systems, as well as the global deployment of interoperable digital identity systems that people, companies and governments can trust, such as electronic ID documents and their fully digital equivalents such as trusted digital driver licenses on mobile phones.

Your draft framework for a merger protocol provides only for very limited protection of our stakeholders. This is not in line with market practice, and is not in line with a friendly recommended transaction. In this respect, your Proposal mentions only a small number of general topics, without mentioning actual and concrete commitments. Important non-financial covenants (NFCs) customary for a friendly recommended transaction of this size and nature are not included in your Proposal, including, but not limited to, those on no-redundancies, continued R&D, approach to customers, the employees’ savings plans, the employee share option plan, and the required fair dealing and protection of the interest of any remaining minority shareholders after your offer would be declared unconditional. In addition, the proposed duration of the NFCs is not specified, and the enforcement of the NFCs is not safeguarded post-completion and delisting, leaving our other stakeholders essentially unprotected.

Your approach

We also noted that your approach in making your Proposal is not reflective of a truly friendly and collaborative approach. On 28 November 2017, your first letter on the Proposal was delivered to our CEO without customary preceding explorative discussions. Following our communication to you that we would revert on or before the 15 December 2017, on 11 December 2017 you announced the Proposal unilaterally without prior consultation. In your announcement of the Proposal you also indicated that you will proceed with filing an offer memorandum with the AFM, irrespective of whether or not you have reached agreement with Gemalto.

This sequence of events and the steps you have chosen to take, have led the Board to believe that your approach, contrary to your statements in your announcement of the Proposal, is not friendly and collaborative. Obviously, the nature of an approach and real signs of a true intention to seek the Board’s support are important for the Board’s consideration of any proposal. We have concerns that this could exemplify cultural differences between our two companies.


After its thorough and careful review, our Board has determined that your Proposal does not, from the perspective of Gemalto, have a sufficiently substantiated strategic rationale and fails to adequately address the consequences it will have for Gemalto’s business. Furthermore, the Board has determined that your Proposal significantly undervalues the Company, is highly conditional and uncertain and fails to adequately address the interests of our various stakeholders. As such, your Proposal does not form a basis for constructive engagement.

Thank you for your proposal and for your interest in our Company.

Very truly yours,

Alex Mandl – Chairman of the Board, Phillipe Vallée – Chief Executive Officer

About the Author(s)

Scott Bicheno

As the Editorial Director of, Scott oversees all editorial activity on the site and also manages the Intelligence arm, which focuses on analysis and bespoke content.
Scott has been covering the mobile phone and broader technology industries for over ten years. Prior to Scott was the primary smartphone specialist at industry analyst Strategy Analytics’. Before that Scott was a technology journalist, covering the PC and telecoms sectors from a business perspective.
Follow him @scottbicheno

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