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StockBeat: Veolia's Fight for Suez Turns Nasty

Published 01/18/2021, 05:24 AM
Updated 01/18/2021, 05:26 AM
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- The battle for control of Suez (OTC:SZSAY) heated up over the weekend, as two private equity groups came to the rescue of the beleaguered French water group's management.

Paris-based Ardian and New York-based Global Infrastructure Partners said they would be willing to pay 18 euros per share for the group, including up to 45c of accrued dividends, effectively matching the bid that Veolia Environment (PA:VIE) made to all Suez shareholders in October, when it agreed to buy a 29.9% stake from utility Engie (PA:ENGIE).

The development appears to be little more than to defend the current position of Suez's management, which is bitterly opposed to being taken over by Veolia. The new offer contains no premium to Veolia's, and the prospect of continued competition between the two in water will do nothing to enhance either's margins. Veolia already has a plan to farm off such assets as necessary to satisfy antitrust concerns and has committed not to cut jobs in France. If Ardian and GIP have any better ideas for creating value for Suez shareholders, they were keeping them close to their chest at the weekend.

Even so, the prospect of Veolia being forced to raise its offer to present a more compelling argument was enough to push Suez (PA:SEVI) stock up 3.1% to a five-year high on Monday, and Veolia's down by almost as much, while the rest of Europe's stock market tended downwards on concerns about the latest wave of the pandemic.

Suez is a natural target for two private equity houses that specialize in infrastructure companies, but their ultimate intentions were still unclear on Monday. In the statement they released, Ardian and GIP described themselves as open to "various possible execution options", of which the offer to Suez shareholders was only one. They said that their letter of intent "paves the way a global solution" and stressed "the friendly context" of their intervention. The only thing that the two said they would not sign up to was a 'dismantling' of Suez.

Veolia was understandably having none of it. 

Over the weekend, Veolia put out a terse statement saying that its newly-acquired shares "are not and will not be for sale: they constitute the first step in the inevitable construction, and under French control, of the world champion of ecological transformation; they are not an element of financial strategy."

"Any project which would directly or indirectly involve the sale by Veolia of its stake in Suez, or other transfers distorting the industrial project that the Group is carrying out, is considered hostile," Veolia CEO Antoine Frérot said.

Suez stayed tight-lipped. 

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