Atos has said it will pursue its "friendly" bid for digital security provider and chipmaker, Gemalto, despite a rejection of the French technology company's €4.3 billion (AU$6.7 billion) offer.
The unsolicited bid comes after a difficult period for Franco-Dutch Gemalto, which has lost close to 40 per cent of its stock market value over the last twelve months following a string of profits warnings.
Gemalto called the €46 per share Atos offer to create a digital security leader "opportunistic" late on Wednesday, although chief executive Philippe Vallee did not completely shut the door on a deal in an interview with French newspaper Les Echos.
Gemalto's biggest shareholder, German billionaire family Quandt, supported the firm's stance, a spokesman for the family said on Thursday. The Quandts own more than 10 per cent of Gemalto's shares, he added.
Atos, meanwhile, repeated its readiness to open talks, saying in a statement it was confident Gemalto's board would engage in talks and that it still had "friendly intentions".
The share reaction on Thursday showed investors were hoping for an improved bid from Atos, with shares in Gemalto, the world's largest maker of chips found in mobile phones and credit cards, trading above €47 at 1456 GMT.
"The most likely scenario for us is that Atos raises its offer," Philippe Cohen, fund manager at Kiplink Finance, said.
"Atos started with a low price, which is logical in thistype of negotiation. There's also the scenario of a 'whiteknight', probably French, such as Thales for example."
Shares in Gemalto, which is run out of France but listed in the Netherlands, have surged since news of the Atos bid. They had fallen heavily after four profit warnings since October 2016.
Atos shares were 2.4 per cent lower at €130.5 as investors priced in the likelihood of it having to pay more for its target if it pursues the chase.
Gemalto's SIM cards have equipped millions of phones, but it has been moving away from this slowing business, trying to grab a share of fast-growing cybersecurity instead.
Gemalto has developed electronic passports with biometric features that are used by 30 countries. It has also developed software for digital banking and data encryption for companies.
Its customers include US telecom operator Verizon and online retailers Amazon and Alibaba.
Gemalto has also attracted the attention of governments around the world for its technologies which are key to surveillance apparatus.
In 2015, it said US and British spies were likely to have hacked it in an attempt to steal codes that protect the privacy of billions of mobile phone users.
Finance Minister Bruno Le Maire said the government will keep a close eye over the impact on jobs and technologies that are deemed important to France's sovereignty.
State-owned investment bank Bpifrance, which is Gemalto's second-biggest shareholder, said that it was favorable to consolidation between two French companies in the tech sector.
Gemalto's French unions, which are negotiating on the terms of a 288 job cut plan in the country, appeared divided on whether to support Atos' bid or not.
“If we can get some visibility on job cuts, we’ll clearly be in favor of the bid,” said Anthony Vella, the union leader for CFE-CGC at Gemalto, as he was taking a break from a works council on Thursday.
Alexandre Benoit, a union leader for CFDT, disagreed.
“If we get bought, the situation is likely to be even worse down the road," he said, citing the cost savings that Atos might want to generate out of the merger.
Vallee came to meet union leaders on Thursday morning to tell them that Gemalto would be better off on its own, the two union officials said. Gemalto also jointly asked to meet Le Maire and Atos's Thierry Breton, who became chief executive nine years ago.
Atos' revenue has more than doubled since 2008 to reach 11.7 billion euros in 2016, having bought assets from Germany's Siemens, U.S. group Xerox and France-based computer company Bull.
(By Michel Rose and Mathieu Rosemain; Additional reporting by Cyril Altmeyer, Patrick Vignal, Marc Angrand in Paris, aJulien Ponthus in London, Arno Schuetze in Frankfurt; Editing by Alexander Smith and Elaine Hardcastle)