Veolia CEO Says He Will Raise Offer Price for Suez Stake

(Bloomberg) -- Veolia Environnement SA’s chief executive officer said he will improve the offer price for most of Engie SA’s stake in Suez SA, and was confident of success despite the water and waste utility’s moves to fend off a bid.

The new proposal for a 29.9% stake in Suez will be examined by Engie’s board, which is meeting later on Friday, Veolia CEO Antoine Frerot said in a press conference in Paris.

The situation, however, remains in flux, and it was unclear whether the revised offer would be submitted on the timetable Frerot mentioned, a person familiar with the matter told Bloomberg. Engie board members are due to work on some points of Veolia’s proposal Friday, while a formal board meeting to make a decision can take place any time until Sept. 30, another person said.

The three companies have been at loggerheads since the initial 2.9 billion-euro ($3.4 billion) offer last month. Engie has said the bid was too low, and Suez has called it “particularly hostile.” Veolia, which wants to eventually take over all of Suez and create a global giant in environmental services, is pressing ahead despite the target’s attempt this week to create a so-called poison pill.

In a bid to thwart Veolia’s approach, Suez is seeking to make antitrust issues more complicated. It made its French water assets non-transferable for four years under certain circumstances. Selling the business would require prior approval from a foundation governed by Dutch laws and from the company’s board, before any change of control.

That could force Veolia to change its plans to address French competition concerns, which would most likely be done by selling Suez’s water assets in the country. On Friday, Frerot ruled out offloading Veolia’s own water business in France to solve the issue. He’s hoping to find a way to “deactivate” the poison pill if Engie accepts its offer, possibly by convincing Suez’s board.

Veolia may also have to sell a couple of incinerators in the U.K. and a landfill in Sydney to address antitrust issues outside France, Frerot said.

Share Move

Suez shares rose as much as 4.9% in Paris and were trading 3.8% higher at 4:16 p.m. Veolia was 1.6% higher while Engie declined 0.5%.

Veolia’s initial offer to Engie is valid until Sept. 30, Frerot reiterated Friday. If Engie accepts its new proposal, Veolia will detail its plan to buy the rest of Suez’s shares in the following days, the CEO said. It may take 12 to 18 months for Veolia to gain antitrust approvals before it can launch the offer to buy the remainder of Suez shares, he said.

The company would undertake a “limited capital increase” and sell some hybrid debt to fund the full takeover, Frerot said.

Meanwhile, Suez has continued to fight to remain independent. It has sought more time to come up with an alternative offer for Engie’s stake, and has also appealed to its investors by pledging higher earnings and payouts through faster asset sales and cost-cuts.

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