French Veolia advances to $ 13 billion Suez buyout despite hiccups

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PARIS (Reuters) – Veolia in France VIE.PA successfully bid for a 29.9% stake in rival Suez SEVI.PA Monday, paving the way for a full takeover offer despite an attempt by the French government to block the deal.

A flag with a Suez logo is seen at the Suez recycling site in Oree-d’Anjou, France, September 28, 2020. REUTERS / Stephane Mahe

Veolia has announced that it will launch a takeover bid at 18 euros per share, the same price it offered to the energy group Engie ENGIE.PA for its participation, in an agreement that would value Suez at 11.2 billion euros (13.20 billion dollars).

It aims to strengthen its global reach through recovery, in a highly fragmented sector. Veolia has so far met stiff opposition from Suez, and the deal has been plagued by hostilities between the parties.

In another twist on Monday, the French state, a major shareholder of Engie, voted against the sale of the stake to Veolia, although a majority of the utility’s board gave its approval.

Dissent has raised eyebrows in France, where the government usually has strong influence over the companies in which it has a stake.

Veolia said it wanted to resume discussions with Suez from Tuesday, after pledging not to launch its takeover bid before obtaining approval from the board of directors of its target.

He argued that the deal will create a “super world champion” in waste and water management, better equipped to take on rivals emerging from China, while the buyout would also result in cost savings of $ 500 million. euros from the first year.

In a bid to overcome antitrust hurdles, as the two companies manage a large part of France’s water supply, he confirmed a plan to sell Suez’s French water business to the Meridiam infrastructure fund. He added that Meridiam would guarantee jobs and invest in the company.

THE REMAINING OBSTACLES

Despite a growing war of words between Suez and Veolia, Engie chairman Jean-Pierre Clamadieu said he believed the two could come to an agreement now that the issue of selling the stake was resolved.

“I witnessed the start of a dialogue,” Clamadieu told reporters.

The French government, which had tried to mediate between the parties and urged them to take their time, had waited for Veolia and Suez to bury the hatchet before the sale of the stake, added Clamadieu.

He said relations with the state were still good, but the company and the government had different interests.

Veolia had increased its equity offer to 3.4 billion euros, and Engie, which is trying to simplify its cumbersome structure and sell assets, said on Monday it would realize a capital gain of 1.8 billion euros. euros before tax on the transfer.

Suez has repeatedly called Veolia’s approach hostile. He warned that it could lead to job losses, and the row had also spilled over into politics.

Last week, several French parliamentarians, mostly from President Emmanuel Macron’s party, also questioned the industrial logic of the agreement and the rush to close it without considering alternatives.

Suez had pleaded for more time to find another suitor. But the only one that emerged, private equity firm Ardian, left earlier on Monday, saying it took six weeks to do full due diligence on any offer.

Suez posed other hurdles that have yet to be resolved, including after setting up a foundation to house its French water business, complicating any takeover.

Reporting by Gwenaelle Barzic, Sarah White and Geert De Clercq; Editing by Mark Potter, Pravin Char and Lisa Shumaker

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