Suez to Sell $1.3 Billion of Assets to German Tycoon Schwarz

(Bloomberg) -- Suez SA, the French utility seeking to derail a takeover approach by domestic rival Veolia Environnement SA, agreed to sell 1.1 billion euros ($1.3 billion) of assets to a waste-treatment unit of Germany’s Schwarz Group.

Suez is eager to convince shareholders that its plan to remain independent will generate more value than Veolia’s offer to create a French giant in environmental services. Veolia last month bid 2.9 billion euros for most of Engie SA’s stake in Suez, seeking a 29.9% holding before potentially snapping up the rest.

Following talks with PreZero, the environmental division of Schwarz Group, Suez has agreed to sell some of its waste-recycling operations in the Netherlands, Luxembourg, Germany and Poland, the company said Wednesday in a statement. The deal excludes plastic recycling and hazardous-waste treatment.

Given Veolia’s recent approach, “it’s even more important today to show that we’re moving forward, and this morning’s announcement shows that we’re progressing as planned,” Suez Chief Financial Officer Julian Waldron said on a conference call. The company has been working on the sale to Schwarz since the start of the year, and more divestments are in the works, he said.

Suez stock slipped 0.5% to 14.93 euros at 10:18 a.m. in Paris, which is below Veolia’s 15.50 euro-per-share offer and values the company at 9.38 billion euros. Veolia shares traded down 1%.

Bloomberg first reported the talks with German retail tycoon Dieter Schwarz on Aug. 7, before Veolia made its approach. The valuation of the assets sold is “attractive,” particularly given Suez’s own market value, Ahmed Farman, an analyst at Jefferies International Ltd., said in a note.

Disposal Plan

Suez will have achieved 40% of its divestment program when the Schwarz deal completes in the first quarter of next year, the company said. It recently announced smaller asset sales in France, Chile and Australia.

“This project marks a major step in the achievement of our Suez 2030 strategic plan, presented last October, which plans to concentrate our forces in France and in Europe, on the activities and geographies where we can deploy our most promising innovations to become the leader in environmental services,” Chief Executive Officer Bertrand Camus said in the statement.

French utility Engie, which has said it’s open to a sale of its Suez shares, has dismissed Veolia’s offer as too low. Suez also rejected the takeover bid as “particularly hostile,” and has said it will seek alternative offers while accelerating its turnaround plan.

Camus and Suez Chairman Philippe Varin are due to meet French Finance Minister Bruno Le Maire later on Wednesday. The government, which has a 24% stake in Engie, will consider all offers while seeking to preserve local jobs, the minister has said, adding that he wants a majority of the potential buyers to be French.

Waldron refused to confirm a media report that Suez is poised to expand its savings plan by as much as 50% to 1.5 billion euros and accelerate its implementation, saying he has spent this week reading “things in the press” he can’t understand.

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