Veolia Seeks to Circumvent Suez’s Opposition to Takeover

Veolia Environnement SA sought to circumvent opposition to a takeover from the management of Suez SA, urging shareholders to put pressure on the company’s board and proposing ways to overcome other obstacles to a deal.

Veolia bought 29.9% of Suez in October, but its plan to proceed with a full acquisition has run up against stiff resistance and the two companies are deadlocked. Veolia says its repeated attempts to begin a friendly dialogue have been rejected, while Suez accuses its suitor of leaving shareholders in limbo by failing to come up with a “firm and precise” bid.

Veolia tried to neutralize that objection on Tuesday, saying in a statement that it will proceed with its 18 euro-per-share ($21) takeover offer as soon as it gets approval from Suez’s board. The French waste and water company had previously said it wanted to wait for regulatory approval before making a formal bid, which could take 12 to 18 months.

“I’m telling shareholders” of Suez “to put pressure on the current board,” Veolia Chief Executive Officer Antoine Frerot said on a conference call. “Express yourself at the next shareholders meeting” in June, or earlier if possible, by proposing a new board that would support Veolia’s bid.

Suez shares closed 1% higher at 15.91 euros in Paris, while Veolia gained 2.4%

Legal Moves

In September, Suez created a so-called poison pill to discourage a takeover, making its French water assets non-transferable for the next four years without the approval of the company’s current board. That would potentially hinder Veolia’s ability to resolve antitrust issues in the event of a deal.

Suez’s move, which places some shares of the French water business in a Dutch foundation, is illegal because it deprives investors of some of their rights, said Professor Xavier Boucobza, who is advising Veolia. Veolia will seek to cancel the transfer before the Nanterre court near Paris, and expects a ruling to take a few months, he said.

Veolia’s lawyers are confident they will get antitrust clearance within 12 months, already having engaged in talks with regulators and identified remedies. By committing to make an offer at 18 euros per share as soon as it gets Suez’s backing, Veolia is dropping any possibility of delaying the deal in spite of the economic and health crisis, Frerot said.

Veolia plans to finance the 8 billion-euro acquisition of the Suez shares it doesn’t already own with 4 billion to 5 billion euros in asset sales, and by selling as much as 2 billion euros in new shares, Chief Financial Officer Claude Laruelle said. The rest would be funded with debt.

Frerot said Veolia won’t ask for board seats at Suez until discussions with competition authorities are complete. However, Veolia would ask regulators to be able to vote at any shareholders meeting to protect its interests, he said.

“Since the Suez board doesn’t even want to take my calls to listen about my project, I will present it directly to the shareholders of Suez,” Frerot said. “It means the takeover bid will take place no matter what, and after the next shareholder meeting at the latest.”

In a hearing in the Senate in Paris on Tuesday, Suez CEO Bertrand Camus reiterated concerns about the viability and competitiveness of entities that will be divested in France in the midst of the pandemic.

Shareholders still face uncertainties about Veolia’s offer, Suez Chairman Phillipe Varin said. He reiterated his demand for a firm offer from Veolia to study the business case including investments, synergies, jobs, and antitrust remedies.

“We will continue to work on alternative options to the scenario put forward by Veolia,” Varin said.

©2020 Bloomberg L.P.

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