Reinforcements in the €11bn takeover battle for Suez arrived at the weekend. The French water and waste group has been under siege since rival Veolia acquired a 29.9 per cent stake last year. Veolia wants to create a national champion and break up Suez in the process. A proposal from Ardian and Global Infrastructure Partners for Suez makes that more likely.
In a farce worthy of Molière, Suez and Veolia have haughtily insisted the other will not talk terms. Suez has opposed the takeover since it was first mooted last summer. Legal obstacles have been erected to make things difficult for Veolia boss Antoine Frérot. Putting critical French water assets into a Dutch foundation created a poison pill only the Suez board can undo. That has bought time and leverage for Suez management.
The intervention of Ardian/GIP may force bidder and target together. The partners, who appear interested in splitting the business with Veolia, say their proposal could lead to an offer at €18 a share, equivalent to almost 30 times this year’s expected earnings. This is the price Veolia paid for the stake it already owns. Pressure to strike a deal should relieve fears that Veolia could end up getting Suez for less at a later date.
It also bolsters the hand of Suez management for a post-takeover role. As part of the original bid, Veolia had lined up infrastructure group Meridiam as a buyer for Suez’s French water assets. These must be sold off for competition purposes. Suez management may be willing to run this operation, which has €5bn or so of assets, if complemented with other businesses carved out in a takeover.
If the best counter offer for Suez is a bid to participate in a takeover led by Veolia at €18 a share, the message is clear: Suez has failed to attract any stronger interest. It is time for the farce to end and the final act to reconcile competing interests. A deal should be done without further posturing.
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