Bull outlines plans to secure its financial future

Bull SA, a French vendor of servers and IT services, plans to return the company to financial health by bringing in new capital and reducing or writing off outstanding obligations, it announced Thursday.

The move marks the third phase in the reorganization of the company’s finances, begun in March 2002 with the injection of €350 million (US$416 million) by the French government, Chairman and Chief Executive Officer (CEO) Pierre Bonelli said in a conference call for the press.

The plan will disengage the French government from the company, giving Bull a chance to make decisions based on the needs of its customers, rather than its investors, Bonelli said

Bonelli announced that existing and new shareholders will inject €33 million in new equity into the company.

Existing shareholders France Télécom SA and Japanese technology company NEC Corp. will invest €7.5 million each in the company. They will be joined by capital management fund Axa Private Equity, which will invest €7 million; German investment fund and major Bull customer Debeka Gruppe (€3 million), Groupe Artemis (€2 million) and some 350 managers at Bull who will invest €6 million, deputy CEO Gervais Pellissier said in the conference call.

The recapitalization is accompanied by a reorganization of the company’s financial structure.

The company, based in Louveciennes, France, has called a general meeting for Dec. 11, where it will propose changes to the conditions attached to convertible bonds already issued, with the effect of reducing their value by 90 percent.

If that is approved, the company’s debts to the French government will be reduced by a similar amount, and the government will then write off the residual debt in return for the right to a proportion of the company’s future profit. Under the proposal, if the company makes pre-tax profit of more than €10 million in any of the next eight years, the state will take up to 30 percent of the excess.

The plan must be approved by the European Commission, Bonelli said. He had no alternative plan if approval is denied, he said.

Bull’s debt to the French government is already the subject of a dispute with the European Commission.

Bull received a total of €450 million from the French government in 2001 and 2002, in the form of “loans” which the government has not asked it to repay. This landed the government in trouble with the European Commission in October because of questions over whether the outstanding loan constitutes illegal state aid.

At a meeting Thursday, Bull’s executive board also considered a proposal from a private investor which would have involved giving up control of the company, but the board did not want to take this step, Bonelli said. Bonelli declined to name the company, citing a confidentiality agreement, but according to a report in French newspaper Les Echos, the rejected proposal was from U.S. investment company Gores Technology Group, which offered to invest at least €50 million in return for control of the company.