The acquisition is seen as a prelude to Veolia launching a full bid for its rival.
Engie says the transaction represents disposal proceeds of €3.4 billion and will generate a pre-tax capital gain of €1.8 billion, to be booked in the 2020 financial results.
The sale comes a day after Veolia ‘unconditionally’ committed not to file a hostile takeover bid following the sale of the shares held by Engie in Suez. Engie says its board of directors took note of this commitment.
Veolia’s chief executive Antoine Frérot said: “I am very happy to lay the foundation stone in France today for a world super champion of the ecological transformation. This is a wonderful opportunity for the employees, customers and shareholders of both groups, and it is a project which serves France and the planet.”
In early September, Veolia’s UK vice-president Gavin Graveson tweeted the deal could help deliver an “ecological transformation” (see letsrecycle.com story).
BNP Paribas, Credit Suisse, Lazard, BDGS, Weil, Gotshal & Manges, and d’Angelin & Co served as Engie’s financial and legal advisers in the exchange.
Jean-Pierre Clamadieu, chairman of Engie’s board of directors, said: “The disposal of Engie’s stake in Suez is an important first step in the Group’s implementation of its new strategic orientations announced at the end of July.
“It will enable Engie to clarify its profile and boost its capacity to invest in renewable energies and infrastructure – the two growth areas it is focusing on to support the energy transition.”
Veolia submitted its first proposal to Engie on 30 August and says it has “continuously improved” it since then (see letsrecycle.com story).
“This is a wonderful opportunity for the employees, customers and shareholders of both groups”
The offer was set at a price of €18 per share, with a dividend included. This represents a premium of 75% above the unaffected price of 30 July 2020, paid immediately in cash and paving the way for a public tender offer on the remaining share capital of Suez for all its shareholders.
Veolia has guaranteed to retain 100% of jobs and social benefits for all Suez employees in France. It has also guaranteed the continuation of a French operation.
Veolia says competition will be preserved because it has a bidding commitment from French firm Meridiam for Suez’s water business. Meridiam has committed to preserving all jobs and social benefits, Veolia says, alongside taking over Suez’s research and development centre, doubling planned investments and injecting €800 million within five to seven years.
Veolia has reiterated its intention to file a voluntary public takeover bid on the remaining Suez share capital to complete the merger of the two companies.
It says its offer will be at the same price as that paid to Engie, €18 per share. Veolia says its offer will not be launched without first having obtained a favourable opinion from Suez’s board of directors, with which Veolia wishes to resume discussions as of today.
Veolia says it envisages a full merger within 12 to 18 months, subject to regulatory clearances.
However, in a statement released following Veolia’s acquisition of Engie’s stake, the board of directors at Suez continued to describe the takeover bid as “hostile”.
The statement reads: “The Board confirmed the Veolia approach is hostile, both as regards the purchase of the initial block as well as the overall project.
“The Board deplores the unnecessary precipitation of Engie Board members in refusing to consider and discuss an alternative project that would be in the corporate interest of Suez along with its shareholders and all stakeholders, employees and customers.
“In the current climate, the Board agrees with Ardian’s decision that it is not appropriate to make any offer to Engie.
“In order to preserve the interest of all its shareholders and stakeholders, the Board confirms that it will put all the means at its disposal to avoid a creeping takeover or de facto control.”