By Joshua Kirby
Veolia Environnement SA's deal to buy a 29.9% stake in Suez SA
from Engie SA has been in the works since late August, but the
process has been anything but smooth.
French waste-and-water-management company Veolia bought the
stake in its peer from energy company Engie with its second bid.
But Suez has been opposed from the beginning and a legal wrangle
has ensued. On Nov. 19, court bailiffs seized documents from the
offices of Veolia and Engie, as well as investment firm Meridiam,
as part of a court order requested by Suez.
At the end of August, Veolia launched an initial bid for the
29.9% stake at 15.50 euros ($18.47) a share. Engie had previously
initiated a strategic review that included a possible sale of its
Suez stake, which meant Veolia's bid was considered likely to
Analysts at Bryan Garnier said that it made sense for Engie to
divest its Suez stake as part of wider streamlining, and that the
acquisition would boost Veolia's international profile.
Suez, however, was opposed from the beginning of the deal.
Management expressed its opposition to Veolia's approach in
September, characterizing the bid as "hostile." Suez said the offer
undervalued the company, and that it had concerns over antitrust
issues and potential job cuts.
On Sept. 17, Engie said it wouldn't accept the offer under the
initial terms, but would be open to an improved offer. As expected,
on Sept. 30, Veolia increased its bid to EUR18 a share, valuing the
29.9% stake at around EUR3.4 billion.
On Oct. 5, Veolia said Engie had accepted the offer. As part of
the offer, Veolia would guarantee job security for all Suez
employees in France, while Meridiam would acquire Suez's French
water-activities arm to preserve competition after analysts raised
the prospect of potential antitrust issues.
Suez continued to oppose the deal, warning of "several serious
anomalies" in the bid in a letter to French Finance Minister Bruno
Le Maire. It also voiced support for a rival bid from
private-equity firm Ardian, which had expressed interest in buying
the stake from Engie.
A twist came on Oct. 9, when a French court ordered the
suspension of the stake purchase. The legal reasoning behind the
suspension, requested by Suez, was that the company's social and
economic committees hadn't been consulted over the deal. Veolia
called the decision "incomprehensible" and "grotesque," arguing
that only Suez management had the capability to organize such a
consultation, and that its failure to do so was born of its
opposition to the deal. Veolia said it would appeal the
Early in November, Veolia confirmed that it still intended to
make a full takeover bid for Suez, offering the same EUR18 a share
price for the remaining share capital. It said the bid would be
launched when the Suez board of directors showed itself amenable.
Suez responded by noting the lack of a takeover offer to date,
saying the only approach had been via media reports. Suez stressed
that any takeover offer would have to reflect the company's value,
as well as set out the detail of the combination and any asset
In an apparent further setback, Suez said on Nov. 19 that the
Paris Court of Appeal had confirmed the earlier decision suspending
the effects of the stake purchase. Since no committee consultation
had been carried out before the deal was finalized on Oct. 5, the
effects of the sale remained suspended until that took place,
according to the ruling, Suez said. "Effects" in this context seems
mostly to refer to the voting rights conferred on Veolia as holder
of a stake in Suez. The company added that it had not received the
necessary information from either Veolia or Engie to carry out the
relevant employee consultations.
For its part, Veolia insisted that Suez had told the court that
it had finalized the consultation on Nov. 5, and that since the
consultation period was three months, it would recover all its
rights relating to the stake purchase on Feb. 5 at the latest.
Suez, however, disputed this, arguing that the starting date for
the consultation hadn't been fixed.
The legal developments took a further twist on Nov. 26, when
court bailiffs entered the offices of Engie, Veolia and investment
firm Meridiam to seize documents relating to the deal, according to
media reports. According to the reports, the court order was
requested by Suez, which apparently suspected collusion between
Veolia, Engie and Meridiam. Suez is also said to suspect that
Meridiam's purchase of Suez Eau was agreed as early as July, even
before Engie Chairman Jean-Pierre Clamadieu announced the company
was considering selling its stake in Suez.
Not only do the bones of contention remain unresolved, there
isn't yet any agreement between the parties as to when they will
be. Veolia says early February is the latest possible end to the
consultation period Suez is insisting on; Suez disagrees. If and
when these issues are resolved, Veolia will launch a full takeover
bid for its peer.
As for the document seizure, Veolia, Engie and Meridiam have the
right to request a counter-judgment to the court order, in which
case the documents seized would be held pending further legal
developments, according to French law.
Write to Joshua Kirby at Joshua.Kirby@dowjones.com
(END) Dow Jones Newswires
November 27, 2020 09:44 ET (14:44 GMT)
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