19 November 2020

Suez – Veolia: “Je t’aime moi non plus”

In this special news report, French journalist Christine Lairy of French publications Metal Tribune and Profession Recycleur traces the developments in Veolia’s bid to acquire Suez.

Created in the second half of the 19th century, the Company Generale des Eaux (Veolia) and Lyonnaise des Eaux (Suez) gave birth to an innovative system where they were able to prosper rapidly: the delegation of water management to private companies, which had traditionally been the domain of the public sector. In the 20th century, they proceeded to get involved in the collection of waste and became specialists in providing environmental services, with their activities extending to energy and cleansing services.

Veolia will have to wait till February 5 to progress its bid to buy Suez

According to Nicolas Mazzucchi, of the Foundation for Strategic Research, this is “unique in the world… Other countries have always seen these as local matters.” This has not prevented neither Suez nor Veolia from exporting their service model and becoming two world leaders in a sector which is very fragmented even today. Between them, it is estimated that the two French groups have a 5% world market share in the sectors in which they operate. Veolia reports a turnover of 27.2 billion Euros (2019), and more than 178,780 employees across five continents. For its part, Suez reports a workforce of 90,000 employees, and a 2019 turnover of 18 billion Euros.

Third attempt

The current attempt at a merger of the two businesses by Veolia, which started in August 2020, is the third in 15 years. It follows the decision of Engie (formerly GDF Suez) to sell its 32% stake in Suez, to better focus on its energy and infrastructure businesses. On 5 October, a little more than a month after receiving the offer from Veolia, Engie agreed to sell 29.9% of Suez to Veolia for 3.4 billion Euros. This was a price of 18 Euros per share, against 15 Euros initially proposed.

The offer accepted by Engie provides for the retention of 100% of the jobs and social benefits of all Suez employees in France – this was a strong guarantee demanded by the French state which is Engie’s main shareholder. With the offer accepted by Engie, Veolia also announced the takeover of the Water France activity of Suez by the French company Meridiam which also undertook to preserve all jobs and social benefits, and to inject 800 million Euros in this new business arrangement within five to seven years.

Veolia chairman Antoine Frerot

Above all, the offer accepted at the start of October by Engie paves the way for a second stage; the filing by Veolia of a voluntary public takeover offer (OPA) for the remainder of Suez’s capital. This offer, explained Veolia chairman Antoine Frérot the day after the green light was given by Engie, “will be made at the same price which was paid by Engie” but it “will not be launched without first having obtained a favourable reception from the board of directors of Suez”.


But in regard to this, things are not so simple. Suez from the beginning considered Veolia’s approach as “unfriendly” and warned about social breakdown, the loss of skills and the end of competition. Moreover, Suez did not wait for the sale of the 29.9% held by Engie to shape its response. In September, the group, which is led by Bertrand Camus, placed its subsidiary Water (Eau) France within a foundation in the Netherlands for at least four years. This foundation cannot be transferred, unless otherwise decided by the board of directors of Suez. This means that Veolia needs to succeed in a takeover bid of its rival to subsequently change the composition of the board of directors to be able to change this foundation arrangement.

Bertrand Camus is chief executive of Suez

However, for the moment, the launch of a Veolia offer to buy the rest of the Suez capital is on hold: on 9 October, the Paris court ordered the suspension of the buyout of Engie’s stake, because of the claim that the Social and Economic Committees (CSE) of Suez and Suez Water France, at the start of the procedure, were not “informed and consulted” on the decisions already taken. Veolia appealed the decision to the Paris Court of Appeal.  On November 19, the Paris Court of Appeal confirmed the suspension at first instance of the buyout by Veolia of the shares held by Engie. If it temporarily suspends its proposed acquisition, until the end of the information-consultation process of the representative bodies of Suez, this decision does not call into question either the acquisition of this block of shares, nor the intention of Veolia to file a takeover bid for the whole of Suez. [updated pm 19 November]


While waiting for this decision, Suez has been working on alternative solutions to a marriage that it does not want: the company is looking in particular for one or more white knights likely to commit in the long term and to be part of its ‘Shaping Suez 2030’ strategic plan, to accelerate its development “in future activities or geographies, for example China or North America where there are enormous needs”. There is talk of open discussions, in particular with the French investment company Ardian. In no way does Suez want partners who would seek to dismember the company. In any event, Bertrand Camus and his teams intend to submit alternative solutions to Suez shareholders at the 2021 general meeting on 30 June.

However, to date, an alternative offer for all of Suez’s assets seems unlikely. And many potential investors are positioning themselves for the divestments that the antitrust authorities will impose on Veolia in the event of a takeover of Suez. In the waste and recycling sector, for example, Paprec stands ready to buy all or part of Suez’s activities in France. Still in waste, Veolia could have to sell Suez activities in Morocco, Great Britain or Australia. The Hong Kong authorities already consider Suez to be controlled by Veolia and prohibit the two firms from simultaneously accessing a tender.

‘An alternative offer for all of Suez’s assets seems unlikely’


Suffice to say that, for the moment, the standoff between the two enemy brothers only succeeds in weakening them and eroding their positions. And that we will have to wait a little longer before seeing the emergence of the French super champion that the CEO of Veolia would like to constitute against his rising rivals, in particular the Chinese Beijing Group which, revealed Antoine Frérot, had repeatedly expressed his interest in the stake held by Engie in Suez.

Driven by necessity, the two companies will perhaps end up getting married. But, in this case, we are unlikely to witness a marriage based on love.

[AUTHOR: Christine Lairy]


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