A Gem disappears, DIS is born!

April 2, 2019

 

Deal done! The EUR 4.8 billion acquisition of Gemalto by Thales, which was originally announced in December 2017 is finally completed! The companies just announced that, as of March 28, 2019, approximately 85.58% of the Gemalto shares have been tendered to Thales’ offer. Consequently, Gemalto is consolidated as of 1 April 2019 in Thales’s financial statements. Thales will acquire the outstanding shares and Gemalto will be delisted from Euronext Amsterdam and Euronext Paris. Gemalto will now form one of Thales's seven global divisions, to be named Digital Identity and Security (DIS).

 

Gemalto was the heir of Gemplus created in 1988 in Provencal village Gemenos. With this acquisition, the “Gem” independent brand name will become a thing of the past.

 

Thales announced goal is to “create a giant in digital identity and security with the capabilities to compete in the big leagues worldwide,” according to Thales Chairman and Chief Executive Patrice Caine. The company will have a large portfolio of digital identity and security solutions based on technologies such as biometry, data protection, and, more broadly, cybersecurity. Thales will thus provide a response to customers, including critical infrastructure providers such as banks, telecom operators, government agencies, utilities and other industries as they step up to the challenges of identifying people and objects and keeping data secure. Thales say that the group will now cover the entire critical decision chain in an increasingly interconnected and vulnerable world, with capabilities spanning software development, data processing, real-time decision support, connectivity and end-to-end network management.

 

Before this acquisition, in 2018, Thales generated revenues of EUR 15.9 billion with 64,000 employees in 56 countries. Gemalto accounted for EUR 3 billion revenue in 2018 with around 15,000 people. The combined entity will have a budget over EUR 1 billion dedicated to Research and Development (R&D) with 3,000 researchers and 28,000 engineers. The Group now has a portfolio of 20,500 patents, of which more than 400 new ones were registered in 2018.

 

Along the acquisition process, the parties had to obtain the agreement of 14 regulatory authorities. The European Commissioner for Competition, Margrethe Vestager, along with other competition authorities, allowed the acquisition under the condition Thales would divest from its General Purpose Hardware Security Module (GP HSM) activity, called nShield. The Antitrust Division of the US Department of Justice (DoJ)  gave its approval to the Thales-Gemalto merger shortly after it was known the acquirer of Thales GP HSM activity was US company Entrust Datacard. Thales GP HSM activity accounted for EUR 100 million sales in 2018.

 

The acquisition of Gemalto had been anticipated with a layoff plan, targeting essentially Gemalto’s traditional smart card activities in France where 230 jobs have been cut. Also, according to La Lettre A, sixty high-level Gemalto executives see their future at Thales protected by an agreement providing them with golden parachutes. At the same time, 480 intermediate-level executives announced they are suing Gemalto, now Thales, in the Labor Court, as they consider the computation leading to their bonus for fiscal year 2015 had been distorted leading to unduly canceling these bonuses.

 

After having acquired Gemalto, Thales ambitions to become a world leader in cybersecurity and play on an even field with the Symantec, McAfee or Kaspersky of this world. Let’s hope this dream comes true.

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