‘Large waste firm’ wants to buy Suez UK

The CMA published three documents alongside two from Veolia. The Veolia pair were on its response to the CMA’s initial finding and on its divestment plan for Suez’s UK waste business if the ruling blocking the Suez takeover is final.

One of the other three documents was from the “large, well-established waste  company” in an anonymous response marked as from ‘Company X’.

In the response document, the anonymous firm said: “If the CMA were to require the divestiture of the UK waste and/or water businesses of one of the parties Company X considers that it would be a suitable purchaser on the basis of the CMA’s assessment criteria”.

A private equity investor is unlikely to be a suitable purchaser

– ‘Company X’

Private equity

Company X claimed that a private equity investor, which has a growing interest in waste management, is “unlikely to be a suitable purchaser for the divestment businesses”.

According to Company X, the divested company is unlikely to have the “management experience, reputation, innovation capabilities, and long term commitment that an existing waste management business would be able to offer”.

The anonymous firm also backed a full divestment of either Veolia or Suez’s UK waste business.

It added that it thinks it is “important that a purchaser has an established reputation in the sector” and said any package should include senior management.

“This is particularly important in relation to the Suez business which has a top-down approach to management and as a result relatively little expertise exists at the individual site level,” the response added.

Firms

Predictions will now begin on who the potential declared suitor, Company X, is for Suez’s UK waste business, which Veolia says will have an approximate £1 billion a year turnover and be one of the biggest UK firms.

It is thought that any of the current larger waste companies could struggle to clear competition concerns and this was pointed out by  the Greater Manchester Combined Authority (GMCA), – see in more detail below.

That would mean some of the other waste firms in the UK who have the financial backing to make such a move could be Company X.

One potential might be Renewi which has contracts such as treatment for the East London Waste Authority.

Irish-owned Beauparc will be considered amongst the favourites. The company was acquired by private equity firm Macquarie in June 2021, and has gone on to acquire a number of firms, the largest of which was B&M Waste earlier this year (see letsrecycle.com story).

Beauparc was mentioned in the response document by Veolia along with four other ‘new entrants’ into the market for municipal waste collection services as proof the merger won’t impact competition.

Here, Veolia said Beauparc is pursuing an “aggressive expansion strategy in the UK and has acquired a number of waste management companies”. Other names noted as new UK entrants into the wider municipal market by Veolia were Countrystyle, Remondis, and Urbaser. German-owned Remondis has a foothold in the UK in north east England but is not thought to have made any recent further developments.

Greater Manchester

The GMCA has a £1 billion contract with Suez to manage 1.1 million tonnes of municipal waste from across the area’s nine boroughs, which commenced on 1 June 2019 (see letsrecycle.com story).

One of a few respondents at this stage of the CMA process, the GMCA said that to address any substantial lessening of competition in the waste sector, the full divesture [sic] of either Veolia or Suez waste operations in the UK represents “the most effective remedy”.

This is in line with the CMA’s ruling last month.

However, the authority warned that the divestiture of Suez to any other “equally strong brand” in the waste sector may result in similar competition questions. It then pointed to Pennon Group’s recent divestiture of its waste business Viridor, suggesting this “might be an indicator of a lack of appetite for such an acquisition”.

Staff

Retention of Suez’s key staff during the divestiture is outlined as a concern, as operations might then suffer through a loss of competence and experience.

The GMCA said: “Although we recognise that staff cannot be prevented from changing jobs, staff retention oversight could be a role for the Monitoring Trustee.” It added that Veolia should not be allowed to seek to recruit key staff from Suez during the divestiture period.

It explained that “the core competitive business entity would be retained and have the scale, competency and capability to continue to deliver services and compete in the marketplace.”