The unravelling of French national champion Atos is a blow to the country’s prestige

Tech company risks being toppled by a familiar tale of debt-fuelled corporate misadventure and hubris

French industrialist Louis Gallois once described his country as a place where fledgling technology companies and start-ups quickly die. France was great at innovation but terrible at building on it, he bemoaned.

After all, this is a country where the engineer François Gernelle built the world’s first micro-computer. Yet while International Business Machines (IBM) and Apple went on to spearhead a multitrillion-dollar global industry, Gernelle’s Micral device became a niche product for applications such as toll booths, selling just 90,000 times. It was a spectacular waste of a genuinely ground-breaking invention.

One wonders what Gallois makes of the spectacular short-wiring of IT services giant Atos. It is one of a handful of genuine tech champions that have confounded his complaint about the existence of a “death valley between what’s developed in a lab and its future as a successful product or company”.

But now it threatens to turn into one of the most humiliating corporate spectacles France has ever witnessed. The importance of Atos is impossible to overstate. It provides strategically important supercomputing and cyber-security services to the state, and is in charge of all the IT for this year’s Olympic Games in Paris. For a government whose international standing has been dealt another blow by images of thousands of angry farmers laying siege to the capital, France can ill afford to see Atos engulfed by chaos. The latest episode in a long-running saga came yesterday with the bombshell announcement that a planned €720m (£616m) rescue rights issue had been shelved and the company had requested the appointment of a court-appointed mediator to help oversee debt-refinancing negotiations with lenders.

It comes after the embattled French IT company appeared to have lost the faith of investors and key advisers. Atos said conditions for the share sale were “no longer applicable” and that a standby underwriting commitment from BNP Paribas and JP Morgan was also no longer in effect.

And as if that wasn’t enough, chief executive Yves Bernaert is out after only three months in the job, replaced by finance director Paul Saleh. He is the company’s fourth boss in two-and-a-half years as a string of executives have failed to get to grips with Atos’s mounting problems.

The revelations wiped 30pc off Atos’s shares within minutes of the Paris Euronext opening, sending them crashing to an all-time low of €2.92. It means the company’s shares, which traded as high as €130 at the turn of the century, have lost 94pc of their value in the past three years. Atos has swung wildly from one calamity to the next despite the best efforts of executives, shareholders and even the French state.

It now has a stock market valuation of just €328m, though even that may be generous to judge from a warning about “possible changes in [Atos’s] capital structure, which could result in a dilution of the existing shareholders”.

The company is in danger of being toppled by an all-too-familiar tale of debt-fuelled corporate misadventure and hubris. Much of the blame has rightly been laid at the door of Thierry Breton, a former French finance minister who led Atos for a decade until 2019. Under Breton, who is now EU commissioner for internal markets, the company chased growth hard. A dizzying debt-financed deal spree boosted its market value but left Atos saddled with costly borrowings.

However, his successor Bertrand Meunier was forced to step down in October after presiding over a deepening crisis and a restructuring plan that has floundered amid growing dissent from some influential shareholders and politicians.

The appointment of Jean-pierre Mustier as chairman has understandably done little to reassure critics given his decision initially to press ahead with Meunier’s faltering proposals.

The now-shelved cash call was supposed to take place in tandem with a break-up plan that would have seen its loss-making IT arm sold to Czech billionaire Daniel Křetínský, best known in the UK for amassing large stakes in the Royal Mail and Sainsbury’s.

But some shareholders have accused Atos of agreeing to overly favourable terms with Křetínský, while French politicians have expressed alarm at the prospect of an overseas investor taking control of a business involved in sensitive military work.

With those proposals seemingly dead in the water, Mustier must quickly come up with a Plan B but his options are rapidly dwindling. Atos is burning through cash quicker than previously thought, and it must repay €2.4bn of bank debt and nearly €1.3bn of bonds next year with the prospect of further credit-rating downgrades looming over it.

Its predicament presents a massive headache for the French government. It cannot allow a company employing 110,000 people around the world to collapse.

Yet a messy nationalisation of an organisation that helps to keep French voters safe will be no more palatable to President Emmanuel Macron, whose dwindling support has taken a fresh battering from the recent farming protests.

It now looks as if a debt-for-equity swap that leaves investors out of pocket is on the cards. Doubtless that will be considered a small price to pay to save such a strategically important company.

However, it will do little to help Macron’s ambitions to turn France into the technology powerhouse of Europe.