ACQUISITION : Veolia and Suez Merger: Definitive agreements by May 14th
French waste management companies Suez and Veolia have agreed on basic features of a merger after months of wrangling. The two rivals said they agreed on a price of 20.50 euros for one Suez share. Veolia's previous offer had been 18 euros. The new group is expected to have sales of around 37 billion euros. The groups want to draw up final contracts by May 14.
According to an announcement issued by Veolia, this agreement would allow the creation of a new Suez made up of assets “forming a coherent and sustainable group from an industrial and social standpoint, with real growth potential, with revenues of around €7 billion.” The two groups propose that the new Suez resulting from this agreement should be owned by a group of shareholders including financial partners from both groups and by employees. The majority of the shareholders of the new Suez will be French.
Antoine Frérot, CEO of Veolia, said: "This agreement is beneficial for everyone: it guarantees the long-term future of Suez in France in a way that preserves competition, and it guarantees jobs. All stakeholders in both groups are therefore winners. The time for confrontation is over, the time for combination has begun.”
Veolia launched the battle for Suez in the summer. For the company, it is already the second attempt to take over Suez. In 2012, the takeover had failed due to antitrust concerns, among other things.
France's Finance and Economy Minister Bruno Le Maire expressed satisfaction with the agreement. "I am pleased that Veolia and Suez have reached an amicable agreement." This, he said, is in line with the desire expressed by the state from the outset. Competition, employment and good development of the companies are guaranteed, he said.
The agreement reached by the groups means that Suez's share capital is valued at around 13 billion euros. However, the company is also indebted to the tune of 10 billion euros. At the beginning of October, Veolia had already bought the energy group Engie's 29.9 percent stake for 3.4 billion euros.
After the merger, a "new Suez" will be created as a spin-off, according to the announcement. This part is to have a turnover of about seven billion euros. The shareholders are to be predominantly French, according to the statement. The plan is for the spun-off Suez part to have water businesses in places such as Italy, the Czech Republic and India, in addition to operations in France.
The long negotiations, marked by dispute, are rather unusual for France. After months of negotiations and court battles with Suez management over an amicable takeover, Veolia recently addressed its offer directly to shareholders. The move had triggered fierce criticism. French trade unions spoke of a "declaration of war". Suez described the offer to shareholders as "illegal" because Veolia had previously undertaken in court not to take hostile action. Le Maire had also intervened. As recently as February, Suez had firmly rejected a hostile takeover.