Suez rejects hostile bid from rival Veolia

Water and waste group Suez has rejected a hostile bid from rival Veolia, branding it “opportunistic”, as the bitter clash between the two French companies deepens.

The competitors have been locked in a battle since the takeover attempt began at the end last summer, sparring in public and dragging each other through the courts.

Veolia bought a 29.9 per cent stake in Suez from Engie in October, adding that it wanted to acquire the rest of the group. Although it had been trying to win over Suez’s board, it finally went hostile in February with its €18-a-share bid. The offer values Suez at more than €11bn, excluding debt.

In its formal rejection of the bid on Friday, Suez said it undervalued the company and warned Veolia’s plans risked seeing Suez dismantled and jobs put at risk — claims that Veolia denies.

Julian Waldron, Suez chief financial officer told the Financial Times, that its shareholders “look at the 2020 results. They look at the cash flow. They look at the dividends. They look at what’s happening . . . to environmental stocks and they think €18 is too low.”

Everybody in the public arena, government and so on would like this story to be sorted out one way or another

Although he would not be drawn on what level of bid would value Suez fairly, Waldron said the Veolia offer was based on flawed assumptions and the benefit of the synergies from a combination were not reflected in the €18-a-share pitch. Suez’s share price currently stands at a little over €17.

Suez chairman Philippe Varin also pointed to the company’s performance — including a better-than-expected net loss in 2020 — and recent disposals, which he said proved its worth as an independent company.

Varin added that Suez would talk to Veolia if its conditions on valuation, competition and jobs were met. The two sides have not spoken since a meeting in early February, before the bid went hostile.

“Everybody in the public arena, government and so on would like this story to be sorted out one way or another,” said Varin. Veolia “knows what we are expecting”.

The public scrap has drawn in the French government, with finance minister Bruno Le Maire pushing for negotiations. More recently the finance ministry has tried to mediate between the two sides, according to people familiar with the matter.

On Thursday, Veolia chief executive Antoine Frérot said he did not need a mediator and wanted to present his offer directly to the Suez board.

Suez’s defence has been partly based on an alternative proposal from private equity funds Ardian and Global Infrastructure Partners. The proposal is also pitched at €18 a share but, according to Suez, is less risky because there is less threat to the deal from competition regulators.

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However, it is predicated on Suez and Veolia reaching an agreement. Ardian and GIP “want to keep their options open. That means, they could go either way,” said Waldron.

One option for the companies remains agreeing to carve out the Suez water business, which Veolia would have to sell for competition reasons.

In such a scenario, Ardian and GIP could help fund such a split, according to people familiar with the matter.