Suez’s Chief Defender Makes His Last Stand in French Water Fight
Suez’s Chief Defender Makes His Last Stand in French Water Fight
(Bloomberg) -- Two veteran executives are at the center of the unfolding dogfight between France’s heavyweight water utilities, and only one is likely to come out on top.
Suez SA Chairman Philippe Varin is leading his company’s defense against what he calls a hostile takeover attempt by rival Veolia Environnement SA. So far, the 68-year-old appears to have the French government on his side, but his opponent -- Antoine Frerot, the chain-smoking chief executive officer of Veolia -- has secured almost a third of the shares.
In essence, it’s the diplomatic skills and classic pedigree of Suez’s Varin versus Frerot’s single-minded focus and the brute force of market dynamics. For now, the 62-year-old Veolia executive seems to have the advantage.
“Varin has been the most aggressive and at this point looks likely to lose out,” said Jean-Louis Sempe, a Paris-based analyst at Invest Securities SA. “The rivalry and hostility of this battle between longstanding adversaries has deep roots.”
Suez’s biggest shareholder, Engie SA, brushed aside the company’s entreaties and sold a 29.9% stake to Veolia for 3.4 billion euros ($4 billion), setting the stage for a full takeover offer.
In response, Varin has vowed to use all means at his disposal to thwart the formation of a French giant with more than 40 billion euros in revenue -- including creating a poison pill last month to potentially block the sale of Suez’s domestic water business.
The battle is over creating a global leader in waste treatment and environmental services -- and who gets to claim victory. The companies tried and failed to cement a deal in 2012, but the unofficial talks foundered on a number of issues including operational disputes.
This time, Frerot -- who has spent the bulk of his career at Veolia -- is forcing the issue against the well-traveled Varin.
The increasingly acrimonious tussle involves firms that have fiercely competed for more than a century, and their leaders bring decades of boardroom experience to the struggle.
In the rarefied world of top French executives, Varin has an almost unparalleled record in salvaging what looked like lost causes. Over more than four decades, he has had stints in heavy industry, car-making, atomic reactors and now a utility striving to be at the forefront of environmental cleanup.
“He’s straight to the point, and he’s tenacious,” said Philippe Knoche, CEO of French atomic group Orano SA, who worked under Varin on the rescue of predecessor Areva SA. “He’s got a sense of the general interest, and he’s not led by emotions.”
As chief executive officer of PSA Group, Varin helped do the dirty work by closing a plant outside Paris, weathering high-level abuse in the process. The restructuring helped pave the way for the turnaround of the country’s largest carmaker.
Steel Turnaround
Varin established himself in the upper echelons of French managers when he steered steelmaker Corus Group Ltd. away from bankruptcy. He returned the company to profit after job cuts and plant closures, and the sale of the group’s aluminum business.
After the restructuring, Corus was sold under Varin’s leadership in 2007 to Tata Steel Ltd., following a three-month bidding war with Brazil’s Cia. Siderurgica Nacional SA.
PSA was an even bigger challenge. He took the helm of the Peugeot maker in 2009, when the auto industry was entering a deep slump in the aftermath of the financial crisis. He managed a rescue by the French state and Chinese investor Dongfeng Motor Corp. The move involved navigating political tensions and a split within the Peugeot family.
Varin’s plan to cut thousands of jobs met with outright hostility by the Socialist government of President Francois Hollande, which accused him of “lies.”
He followed that up with a move to France’s nuclear industry -- the inner sanctum of the nation’s industrial sector -- becoming chairman of reactor maker Areva when it was being partly taken over by operator Electricite de France SA.
In his own words, the two state-controlled companies had been through a “period of hostility.” In that deal, he also took on the role of defender, pushing EDF to raise its offer.
Off Guard
Frerot, who bounced around before landing at a precursor of Veolia in 1990, has also weathered corporate storms. During more than a decade at the helm of the Paris-based company, he pulled off a turnaround, rebuffed the approach from Suez in 2012 and overcame efforts to remove him. He may now be in position to outmaneuver Varin.
For all his past deal-making experience, the Suez executive was caught off guard when Veolia launched its blitz at the end of August, even though Frerot had called Suez CEO Bertrand Camus early that month to discuss a possible tie-up.
The French government, which owns more than a fifth of Engie, voted against the sale of the Suez holding. While that gave Varin some leverage, it may be fleeting.
The government is focused on a truce rather than preventing a deal. Finance Minister Bruno Le Maire is pushing for a friendly outcome and has warned against tie-ups born of strife.
Describing his years at PSA, Varin has spoken of “tough moments, sad moments.” The description might also apply to Suez if Veolia’s takeover is sealed.
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