Veolia to Buy Engie’s Suez Stake in Prelude to Full Takeover


(Bloomberg) — Veolia Environnement SA will buy a 29.9% stake in Suez SA from Engie SA for 3.4 billion euros ($4 billion), setting the stage for a full takeover — and potentially a long and acrimonious corporate battle.



a sign on the side of a building: A company logo sits on display at the Veolia Environnement SA headquarters in Paris, France, on Wednesday, Sept. 30, 2020. Engie SA got five more days to consider Veolia Environnement SA’s 3.4 billion-euro bid ($4 billion) for most of its stake in Suez SA, prolonging a corporate fight in the hope of making it less hostile.


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A company logo sits on display at the Veolia Environnement SA headquarters in Paris, France, on Wednesday, Sept. 30, 2020. Engie SA got five more days to consider Veolia Environnement SA’s 3.4 billion-euro bid ($4 billion) for most of its stake in Suez SA, prolonging a corporate fight in the hope of making it less hostile.

Engie’s board agreed late Monday to sell the stake after Veolia increased its price for its holding by 16% and offered guarantees on employment.

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A full takeover would create a global giant in waste and environmental services. But Suez, which has tried to thwart the purchase, remains fiercely opposed to what it calls a “hostile” approach, and said again on Tuesday it would use all the means at its disposal to protect its stakeholders’ interests.

Combining Veolia with its smaller rival would create a French national champion with more than 40 billion euros in sales worldwide. The deal would have to clear antitrust hurdles and overcome the French government’s concerns about job losses. The Finance Ministry, which owns more than a fifth of Engie and had pushed for a friendly outcome, voted against the sale of the stake.

“Veolia has pledged to maintain jobs until the end of 2023, which is a very valuable commitment in the current backdrop,” Engie Chairman Jean-Pierre Clamadieu said in a conference call on Monday after announcing the deal. “Both companies will have to find a common ground” because “a merger needs to be friendly to be successful.”

Fierce Resistance

Veolia has made an unconditional commitment not to make a hostile bid, Engie said. To proceed on a friendly basis would require a major change of heart from Suez, which has pledged to “use all means at its disposal to avoid a creeping takeover.”

In a statement, Veolia pledged to launch a takeover bid at 18 euros per share once it receives regulatory approval. The company reserves the right to change the offer price in the event of any asset disposals, acquisitions or other events that impact Suez’s balance sheet. It also reserves the right not to file a tender offer in the event of major adverse circumstances, or of sale by Suez of any strategic asset.

Suez had been pushing a rival offer from Ardian SAS as a way to fend off Veolia, but the private-equity firm said earlier on Monday that it won’t be making a takeover approach right now. Suez has also changed the legal structure of its French water business in such a way that it would be more difficult for its suitor to resolve any antitrust issues.

The two companies held several meetings in recent days and made some good progress, despite not managing to reach an agreement on a friendly takeover, Clamadieu said. He expressed optimism that “pragmatism” will return once the bloc of Suez shares is transferred to Veolia, which should happen very quickly.

The sale of Engie’s Suez stake will generate a pretax capital gain of 1.8 billion euros, to be booked in the 2020 financial results, the company said. The proceeds will enable the utility to “boost its capacity to invest in renewable energies and infrastructure — the two growth areas it is focusing on to support the energy transition,” Clamadieu said.

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