Veolia Goes Hostile in Attempt to Buy French Rival Suez

Veolia Environnement SA opened an aggressive front in a long-running attempt to buy French utility rival Suez SA, taking its offer directly to the company’s shareholders after months of being rebuffed by management.

In a statement late Sunday, Veolia expressed exasperation at the Suez board and said it will pay 18 euros a share for the 70.1% of the company it doesn’t already own. The proposed deal values its rival’s equity at 11.3 billion euros ($13.6 billion). Suez had net debt last year of about 10 billion euros.

Suez hit back, suggesting that the offer was “illegal” following a commitment it says Veolia had made in court to keep matters amicable. Unions called the move a “declaration of war with no return,” suggesting the impasse is no closer to being resolved.

Veolia’s latest maneuver represents another twist in a months-long battle that’s playing out in the boardroom, the courts and the French political arena. The reaction from Suez and the unions also puts pressure on the government to broker a deal -- it has repeatedly stated it wants the companies to come to an amicable solution.

But Veolia’s move also ups the ante on Suez’s board, which may be increasingly challenged by shareholders ahead of an annual meeting due to take place by the end of the first half.

Old Project

Veolia stunned Suez and the utility industry when it announced a plan to merge with its arch-rival last summer, rekindling an old project to tie-up the world’s largest waste and water utilities.

In spite of Veolia Chairman and Chief Executive Officer Antoine Frerot’s reassuring words about it being a friendly approach, Suez has consistently cried foul. Last week, Suez Chairman Philippe Varin said talks between the opposing parties would start “very soon.”

Suez says the combination, which would create a giant in environmental services with more than 40 billion euros in annual revenue, would hurt employment and reduce competition. Suez has lined up the support of private equity funds Ardian and Global Infrastructure Partners.

To resolve any antitrust issues, Veolia has proposed selling some assets, including Suez’s French water business. Suez has been trying to thwart the move by making it harder to sell that unit without the consent of its current board, a poison pill that Veolia is hoping to de-activate and which is the subject of one of the many fights between the two companies in French courts.

“I am more than ever willing to discuss with the management of Suez the perimeter to be reinforced around Suez Eau France that we could sell,” Frerot said Sunday.

The tender offer, as well as the draft offer document, will remain subject to review by the French financial market authority, Veolia said.

The closing of the offer, once opened, will be subject to getting a merger control authorization by the European Commission, the company said. Veolia reserves the right to waive this condition.

It expects the transaction to be complete in the first quarter of 2022.

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