Suez rejects Veolia’s €18 per share offer as ‘not satisfactory’

Suez has determined that Veolia’s industrial project and €18 per share offer are ‘not acceptable’, the waste firm has said.

Having met on several occasions during January and February to review the terms of Veolia’s offer, the Board of Directors of Suez unanimously decided that the conditions ‘were not met’ to support its €18 per share offer.

The Board said it reiterated its objective to reach a solution that delivers a ‘fair valuation’ of the Group for its shareholders, provides social guarantees for employees, ensures that all the Group’s commitments to its customers are maintained and conforms to SUEZ’s corporate interest; a transaction that would involve SUEZ’s dismantling threatens the Group’s corporate interest.

‘The transaction planned by Veolia threatens our SUEZ 2030 strategic plan and would negatively impact SUEZ’s value,’ it said in a statement.

‘Veolia’s scale objective does not bring with it any clear benefits for the provision of essential services.

‘It does not enhance technological innovation, quality of service or agility which are SUEZ’s strengths as a global leader working to meet the major challenges of the ecological transition.’

Waste management firm, Veolia, acquired a 29.9% stake in rival Suez last year and said it would file a voluntary takeover bid for the remaining Suez shares.

The formal proposal came in January and set out elements of the industrial project, the social project and the financial conditions.

‘Not satisfactory’

Its 2020 results, according to Suez, ‘confirm’ that the price offered by Veolia, and which would only be payable in May 2022 at the earliest, ‘is not satisfactory’:

  • The intrinsic value of SUEZ is well above the price offered, SUEZ’s intrinsic value is illustrated by our 2020 results and by the accelerating financial trajectory for 2021. Revenue growth, enhanced profitability and cash flow will drive dividend growth and support the payment of exceptional dividends. Our progress in delivering our SUEZ 2030 strategic plan highlights our ability to focus the Group on the highest-growth areas.
  • The economic and financial environment has improved significantly since Veolia acquired Engie’s stake in SUEZ; since October 4, 2020, the CAC 40 index has gained c. 20%.
  • The €18 per share (cum dividend) offer price discriminates against SUEZ’s minority shareholders as compared with Engie. Engie sold its SUEZ shares at a price of €18 on October 6, 2020. Minority shareholders in SUEZ, would not receive payment until May 2022 at the earliest, and Veolia’s offer remains subject to significant execution risks related to the required regulatory authorisations.
  • In this respect, and considering the improved prospects driven by the continued execution of the SUEZ 2030 strategic plan, the reference share price as well as other valuation metrics selected by Veolia in its draft offer document are out of date and misleading. The price offered by Veolia represents a premium of merely 13.1% versus SUEZ’s share price as of February 21, 2020 (pre-Covid outbreak).
  • The €18 per share offer price does not take into account the synergies that Veolia has put forward in its offer document.

SUEZ employees

The social commitments made by Veolia are also ‘unsatisfactory’, according to Suez. It said that in practical terms, Veolia’s duration is limited and it is ‘vague’ in certain aspects and in part non-binding.

The proposed combination also ‘exposes our customers and shareholders to significant execution risk,’ it said.

Suez says that the proposed transaction ‘raises significant antitrust issues,’ both within the European Union and in the UK.

‘Competition guarantees quality service at a fair price and is essential to meet the needs of public and private customers who have expressed their concern about this Veolia’s offer,’ Suez said.

‘Completion of this transaction would put at risk SUEZ’s commitments to its customers in water and waste recycling and recovery activities.’

The Board of Directors said it ‘reiterates its wish’ to find a negotiated solution and will take whatever steps necessary to make sure that ‘Veolia does not impose its interests at SUEZ’s shareholders’ meeting’.

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