Suez Scolded by Watchdog as Veolia Takeover Fight Heats Up

Suez SA, the waste and water utility fighting the takeover ambitions of French rival Veolia Environnement SA, was reprimanded on Friday by stock-market regulators for backing a counterproposal involving two private-equity firms.

France’s Autorité des Marchés Financiers took a critical view of a solution put forward by Suez on March 21 that would involve Veolia paying 20 euros ($23.50) per share -- 2 euros more than it has offered -- and selling on more than half of the company to Ardian SAS and Global Infrastructure Partners.

The AMF said the announcement “does not, in reality, correspond to a price Suez shareholders would be able to get.” The authority also criticized Suez’s recent changes to a Dutch foundation that could block the sale of its French water operations and complicate the resolution of eventual antitrust concerns.

While both maneuvers were considered by the AMF as breaches of takeover rules, the authority chose to admonish Suez rather than issue any sanctions.

The AMF warning may be an attempt to spur talks between the rivals and turn down the volume on a bitter argument that has spilled over into the courts and in the political arena since Veolia announced its plan to take over Suez seven months ago. It bought a 29.9% stake in the company in October, as a first step to a full takeover.

Suez criticized the AMF for “expressing an incomprehensible position and favoring yet again Veolia.” The utility said in a statement that the decision is based on a “seriously incorrect analysis” and is in “total contradiction” with a French law.

Veolia declined to comment. On Tuesday, Chief Executive Officer Antoine Frerot said Suez’s counterproposal with the private-equity funds was just an attempt to extend the stalemate rather than engaging in talks.

In its Friday statement, the AMF said that changes announced last month to the poison pill foundation weren’t proper as they left Veolia with only very few options to deactivate the legal mechanism.

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