The water and wastewater management giant, Veolia, launched an offer on Sunday for the entire share capital of its rival company, Suez, for a total of 11.3 billion euros ($13.6 billion), after months of trying to win the backing of the Suez board.
Since Veolia acquired a 29.9% stake in Suez in October and becoming its largest shareholder, the Bertrand Camus-led firm has resisted all takeover moves from Veolia, saying recently it had received a letter of intent from the funds Ardian and GIP (Global Infrastructure Partners) proposing an amicable takeover at a price of 18 euros per share. A move Veolia immediately discarded.
On Sunday, Veolia said: “Since the acquisition by Veolia on October 5, 2020, of a 29.9% stake in its capital, the management of the Suez group has on numerous occasions renewed its wish to be presented with a formal purchase offer, without ever having followed up on the offer proposal sent by Veolia on January 7, 2021. The continuation of legal proceedings, the systematic appeals against any court decision in favour of Veolia - particularly on February 3, 2021, when the Group regained the full effect of its status as a Suez shareholder, the pursuit of a competing project with the GIP and Ardian funds, contradict day after day the manifestations of friendliness of Suez's management.”
Suite à la tentative de @Veolia de violer son engagement d’amicalité, la justice interdit le dépôt de son offre publique hostile.
SUEZ réitère sa détermination à promouvoir l’intérêt de ses parties prenantes, actionnaires, salariés et clients.
— SUEZ (@suez) February 8, 2021
Having made a pledge in October to get approval from Suez’s board before releasing a full tender offer for the French water company, Veolia’s management group have changed their minds and launched an offer, which has worsened the already tense relationship between the two French titans. In a statement released on Monday, Suez said: “Veolia is legally prevented from filing a tender offer due to the commitments they have taken, and any such filing would be illegal. In addition, it would be unacceptable from an ethical standpoint.”
Antoine Frérot, Chairman and Chief Executive Officer of Veolia, and Bertrand Camus, Managing Director of Suez, met on Friday to discuss a possible agreement; however, according to Veolia, Camus gave no sign he would change his mind, which led Frérot to launch its 18 euros-per-share offer.
“The Board of Directors of Veolia has considered that the formal filing of a tender offer was the only decision likely to respond both to the repeated requests of Suez's management and to provide employees, customers and shareholders of both groups with an unambiguous, transparent and definitive clarification, read Veolia press release.”
A spokesperson for Suez said: “This move shows that there was never any intention of trying to proceed in a friendly manner.”
Suez’s union has also rejected the new offer, announcing in a statement they would oppose what they called Veolia’s “declaration of war.”
The Commercial Court of Nanterre on Monday prohibited Veolia from filing its hostile public offer, reported Suez in a statement.
In a counterstatement, Veolia announced its tender offer for the entire share capital of Suez was validly filed on Monday with the French stock exchange authority Autorité des marchés financiers, prior to the notification of the Commercial Court of Nanterre. In accordance with applicable AMF rules, this offer will be subject to a compliance review.
L’opération entre Suez et Veolia ne peut réussir que si elle est amicale. J’appelle une nouvelle fois les parties prenantes à retrouver le chemin de la raison et du dialogue. En ces temps difficiles, le capitalisme français ne peut pas être la guerre de tous contre tous. pic.twitter.com/lLg7vo7nqR
— Bruno Le Maire (@BrunoLeMaire) February 8, 2021
In an attempt to dissuade Veolia from a complete takeover, Suez also created a foundation to protect its water activities. Nevertheless, a French court has ruled that the structure could only be made intractable with approval from Suez shareholders, so the move can still be undone.
According to Reuters, the annual shareholder meeting in the following months will be transcendental for the outcome of this ongoing battle. According to a court ruling last week, Veolia has the power to exercise its full shareholder rights, which means the company can propose motions and vote. This could be prejudicial for Suez, according to certain analysts, as it could lead to moves against Suez’s board.