Veolia has said the UK operations held by Suez are “complementary” to what Veolia provides, but says any potential deal could take between nine and 15 months for regulatory approval.
The potential timeline has been given by Veolia within its proposal detailing how the Paris-headquartered waste management company intends to bid for 70.1% of its French rival (see letsrecycle.com story).
Veolia announced that it has issued the proposal in English on its website today (11 January). It said it would finalise a ‘merger’ of the two companies once it had obtained competition authorisations, and that this could take up to 15 months. However, at present it cannot make a formal bid while legal consultation mechanisms are in play.
The draft offer proposal makes explicit reference to the two companies’ operations in the UK. Veolia is a major player in waste management in the UK, the proposal says, operating in the municipal sector as well as in the tertiary and industrial sectors. It also operates in municipal water, energy services to buildings and services to industry.
The proposal says Suez has a portfolio of around 10 private finance initiative (PFI) or public-private partnership (PPP) contracts in waste, comparable to those held by Veolia but “geographically complementary”. Suez also has a significant presence in the collection of ordinary industrial waste, which the proposal again says is complementary to Veolia’s own collections.
These “geographical complementarities” mean the potential for “value creation” through “operating synergies” around internalisation, plant availability rates, and electricity sales is significant, the proposal says.
Suez’s board of directors acknowledged receipt of Veolia’s draft offer proposal on 7 January. It says that in the past four months it has “repeatedly requested” further details of the bid.
The board said in a statement: “The board will examine the document received. The interests of the project for shareholders and other stakeholders, including employees and clients need to be assessed in the light of alternative projects with the potential to create significant shareholder value, within a rapid and controlled implementation schedule. The board will also be attentive to the coherence with the Suez 2030 strategic plan and the group’s purpose.
“As stated by Veolia itself, a binding offer cannot be filed at the moment with the Autorité des Marchés Financiers: indeed, the operation proposed was organized and structured by Veolia in irregular terms; the operation is subject to legal procedures and suspensive judgments in court.”
In terms of its bid, Veolia has proposed a cash price of €18 per share tendered, with dividend rights, without interest and subject to the deduction of any withholding tax that might be applicable.
“Now is the time for the Suez board and management team to cease their constant refusal”
In its proposal, Veolia says that by merging with Suez it could “create a global champion group of ecological transformation, with French and European roots”.
Veolia said in a statement: “Our offer is the best option for Suez and for its shareholders. Despite market rumours, no real alternatives have been presented to Suez shareholders over the past five months since we first announced our project.
“Now is the time for the Suez board and management team to cease their constant refusal, act in the interest of all shareholders and allow them to have their say on our project.”
After announcing its intention to buy Suez in August 2020, Veolia acquired an initial 29.9% stake in the company from Engie, a major shareholder in its rival, on 5 October (see letsrecycle.com story). The move was seen as a prelude to Veolia launching a full bid for its rival.
The price was set at €18 per share. Engie said the transaction represented disposal proceeds of €3.4 billion and would generate a pre-tax capital gain of €1.8 billion, to be booked in the 2020 financial results.
On the same day, Veolia confirmed its intention to file a voluntary tender offer for the remaining share capital of Suez to complete the merging of the two companies.
Veolia has an agreement in place with Meridiam, a French infrastructure management company, in anticipation of its merger with Suez. Meridiam has committed to acquire all the activities of Suez Eau France and its subsidiaries at a market price, including the business of designing and building water treatment installations in France and the R&D activity associated with that division. Meridiam’s offer is valid until 31 December 2022 and is conditional on the merger going ahead.