Interesting to see in the text of the ATOS SE earnings transcript the following ”We were interested in buying DXC based on public information. We requested more information and after reviewing it, we decided not to pursue. As simple as that.” Yet DXC would have you believe that they rejected the bid as it wasn't enough. Someone is lying and I have a good idea which side is telling the truth
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Money is currently cheap and debt only becomes a problem when you do not have enough profit to cover the interest. Or you breach a covenant on the debt and the lenders decide you are a bad risk. DXC shareholders are pretty diverse and the largest shareholder at 11% is Vanguard who just track the market. The remaining top 10 investors hold less than 25%. DXC is rated a "hold" by the majority of covering analysts which on Wall Street is often called a "soft sell". The quarterly calls show the quality of analyst coverage. It's only on the last call that someone start asking the harder questions. And the Non-GAAP adjusted numbers cannot cover up declining revenues YoY and falling profits.
Considering how DXC reports quarterly statements with NON-GAAP (generally accepted accounting principles) numbers, who knows what's really going on behind the scenes. Neither company has a great reputation within the industry, so there's probably a lot of truth to what @oup+19y9yfgP stated about both trying to save face. On top of that, maybe ATOS was unwilling to pay out the golden parachutes that DXC executives were demanding as part of the deal.
I think if you look across Wall Street you will see a wide variety of stocks that have high debt ratios.
In fact I could cite you a few major stocks where their long term debt is multiples of REVENUE let alone profit.
If you were thinking about your own personal finances and your debt (excluding mortgages) was multiples larger than your salary, you'd be in trouble. A lot of trouble.
Business is different. Wall street is even more complex than just a small business too.
DXC's $5bn of debt is nothing unusual. Ironically managing the debt is one of the few things DXC is actually on top of.
The ATOS offer was probably initiated because the debt was manageable, not that it failed because it was out of control.
As for the statement from both sides.... well both had to walk away saving face. They are both publicly traded companies, nobody is going to say the precise reasons. I suspect ATOS were being cheeky (and couldn't afford to say "we got this wrong")and I think DXC refused because several large shareholders had informal discussions with the leadership and said they'd refuse it at that price. You can guarantee an informal poll of about 10 of the big holders took place. No board wants to propose something publicly and have a public argument with their shareholders.
Remember Wall Street is all about sentiment and barely anything about substance. A wrongly worded press release can crash your company.
Wait another 3 quarters and try again Atos.. Maybe @ $6.50? The DXC board will open their eyes! DXC 2016 post merge was $20b+ revenue, this year probably $15.5b revenue, next year very likely less, circa $12b. And how much debt has been taken on? For goodness sake.. Ironically the debt is the key, larger debts make it easier for a board to make quick decisions - albeit at lower prices.