At a large board meeting table, on Monday evening, October 5, Engie’s Board of Directors met to make a difficult decision: whether to accept Veolia’s improved offer for the purchase of its 29.9% stake in Suez. If Engie accepted, it would have the means to finance its diversification into renewable energy, a vital part of its newly announced strategy; if not, it would have to wait for another proposal worth at least 3.4 billion euros (nearly $4 billion). Finally, a verdict was made: 7 votes in favour (from the Chairman, 5 Directors, and one of the representatives of the GSC) and 4 against - 3 from State representatives.
Over a month of tense negotiations and threats between Suez, Veolia, the French government and Engie had finalized, or so it seemed. On August 30, Veolia had made its first offer to buy Engie’s 29.9% stake in Suez for 2.9 billion euros ($3.4 billion). The offer was announced a month after Engie said it was divesting from some of its subsidiaries, including Suez. Why was Veolia only interested in 29.9 per cent and not the total 32 per cent stake that Engie owns? The Parisian explains it clearly. If the proposal had been for 30% or over, a longer takeover bid would have been necessary, delaying the whole process. Something that Veolia wished to avoid. However, the French giant always had a merger in mind, which would be possible via a takeover bid on the remaining shares during the second stage of the proposal.
The news was not well received in Suez and the company’s CEO Bertrand Camus called it a “hostile takeover”. The Board of Directors of Suez immediately looked for ways to block Veolia’s move. On September 24, the second most important player in environmental services in France announced it had transferred its French water business to a foundation in the Netherlands, non-transferable for four years unless otherwise decided by the Directors appointed by Suez. A “pitiful” deed Veolia said, but that did not deter it from its mission to create an environmental giant.
This was only part of Suez’s counterattack. The group met with various private equity investment companies to convince them to place an offer for its stake in Engie. Finally, on the Sunday evening of October 4, Le Monde reports that Dominique Senequier, founder of Ardian, a France-based private investment house, promised a price of 18.50 euros per share, higher than the 18 euros of Veolia. Senequier promised to unveil the project the next day at midday before the decisive council of Engie. Nevertheless, on Monday, Ardian suddenly backed out. In a statement, the company said: “Following the expression of its interest, Ardian worked on an offer supported by Suez employees and its Board and requiring 6 weeks of due diligence. However, Ardian, faithful to its principles of non-hostile negotiations, has decided not to submit an offer to allow time for ongoing discussions.”
The next day, Engie accepted Veolia’s €3.4 billion offer against the expressed wishes of Bruno Le Maire, French Minister of the Economy and Finance, who had said that without an amicable agreement between Suez and Veolia, the proposal could not be accepted. Furious, the target of this proposal announced it would take Engie to court. Clamadieu, Chairman of Engie, on his behalf, said: "We mustn't give in to emotion”, as he was confident he had made the right choice and that both sides would be able to find common ground.
The story is far from over: the takeover bid by Veolia could take, at best, twelve to eighteen months. It will come up against the active resistance of Suez, as was seen three days later. On October 9, the Paris court suspended the purchase by Veolia following a summary judgment of the social and economic committees (CSE) of the Suez group. Be that as it may, Antoine Frérot, CEO of Veolia, seems determined to create his environmental giant, cost what it may.
