Veolia’s Bid $3.5 Billion to Acquire Rival, Engie’s Suez
Veolia Environnement SA (Veolia), on Sunday, August 30, 2020, made an offer of $3.5 billion to acquire a 29.9% share in its French rival Suez SA (Suez), a utility company owned by energy giant Engie SA (Engie) in an attempt to strengthen its presence in the global waste and water management industry. Veolia has been keeping an eye to fully acquire its competitor and would pursue a complete acquisition once the proposed deal is accepted by Engie.
Reflecting the emergence of strong competition from Chinese companies in the utility market, Veolia considers the latest deal would help it to create a “world champion of ecological transformation”. According to media sources, Suez board would be meeting “shortly” to consider the unsolicited bid and its the parent company, Engie said it would examine the proposed deal in the coming weeks.
Following the news, Suez witnessed a record surge of its shares, gaining more than 19.28% and traded at 14.46 euros in early Monday as its best day ever while Engie shares rose 6% at 11.81 euros and Veolia’s shares were trading up 3.7% to 19.81 euros.
In this latest deal, Veolia is offering Engie for 15.50 euros a share in cash, 27% more than where the target closed Friday, Veolia said in a statement. As per the media reports, some investors suggested that Veolia’s bid would be successful and if it turns out to be true, then Veolia would formally extend its bid to take over the rest of Suez’s shares. The reports estimated that the complete acquisition of Suez would be around 20 billion euros ($23.8 billion), which includes the existing debt of the company.
Engie, in which the French government has a 23.6% stake, is currently focusing to simplify its structure by selling assets amid the harsh impact of the coronavirus pandemic as well as growing government’s pressure to fight issues such as climate change.
Veolia’s Chief Executive Officer, Antoine Frerot said in a conference call, “In a global market, size is critical to financing the equipment needed to fund the environmental transition of cities and industries,” and also added, “The complementarity of both groups is very strong.”
As per Reuters, Suez and Veolia’s businesses are highly complementary in the global market despite they have issues over their overlapping business operation in the domestic market. The first talk for the acquisition deal between them happened in 2012 but the talk failed due to anti-trust concerns.
Veolia said on Sunday that it had already identified competition issues and its main aim is to dominate the utility industry by squeezing the market from rival mainly Chinese companies. Frerot added that the industry, which is worth 1.4 trillion euros, is highly fragmented and a combined company with Suez will still have less than 5% of the total market. He further said, the competition in this market has grown significantly due to the large presence of Chinese companies that involve in overseas operations and investments.
Analysts at Bryan Garnier explained, however, “The acquisition of Suez would make Veolia more international, with significant positions in Spain and Northern Europe in particular,” reflecting the rationale for the deal. Meanwhile, Finance Minister Bruno Le Maire said on Monday that the government would examine the proposed offer considering the dire impacts of the deal.