Veolia’s initial acquisition of 29.9 per cent of its rival Suez has dragged both sides through the courts and divided investors into opposing camps © AFP via Getty Images

Suez has agreed to open discussions with its rival Veolia, the French waste and water group, after receiving an alternative proposal in one of the most vicious takeover battles that France has seen for years. 

Late on Sunday evening the board of Suez said it had received a letter of intent from two funds, France’s Ardian and Global Infrastructure Partners, that could lead to an offer at €18 a share. This “would facilitate the emergence, and in a short timeframe, of an amicable solution”.

With the proposal on the table, Suez added that it was now “willing to open a dialogue with Veolia with the aim of building a solution in the interest of all concerned parties, which would reinforce both of the two French leaders in environmental services”.

Bertrand Camus, Suez chief executive, said the eventual offer could be for up to 100 per cent of Suez but that there was no fixed goal in mind ahead of negotiations with Veolia. 

“We have a solution on the table and we are extending our hand so that we can engage in a discussion,” Mr Camus told the Financial Times.

The Suez alternative comes more than three months after Veolia bought 29.9 per cent of its rival, kicking off a fight which has dragged both sides through the courts and divided investors in Paris into opposing camps

Veolia bought its stake from French energy group Engie. Earlier this month it outlined the plan for the takeover it intends to submit for the rest of Suez’s capital — also at €18 a share, valuing the bid at more than €11bn.

The two companies have been at each other’s throats since Veolia made its intent to take over Suez public at the end of August. Mr Camus has so far refused to engage with Antoine Frérot, Veolia’s chief executive.

To win leverage, Suez created a poison pill in September, putting its French water assets into a Dutch foundation mandated to protect them for four years unless the Suez board decides otherwise. Veolia had intended to sell those assets to meet competition concerns.

While Veolia has been gearing up to put its propositions to Suez shareholders this summer — and while the war of words continues in public, alongside legal challenges and antitrust reviews — advisers on both sides have said that the door remains open to finding a friendly solution. 

The last time there was anything close to a deal acceptable to Suez was in early October, when Veolia put an expanded carve-out of Suez’s French water business on the table. It was worth about €5bn in annual revenues and could be run by the current management. 

One option, in light of Sunday’s alternative proposal, said people close to Suez, would be for Veolia to accept some assets in exchange for walking away.

While refusing to be drawn on what a deal could look like, Mr Camus said there were limits on how far he could go: “Suez in the future has to have a coherent industrial project. It has to be a company that can grow, that can compete in the market. It cannot be just a sum of things that cannot be kept by Veolia.”

However, Veolia responded quickly on Sunday to say that the shares in Suez it owns “are not and will not be for sale”.

The stake constitutes, said Veolia, “the first step in the inevitable construction, and under French control, of the world champion of ecological transformation; they are not an element of financial strategy”.

Mathias Burghardt, head of Ardian Infrastructure, underlined that its letter of intent was not a counter-offer but a way “to allow a negotiation to take place” and is predicated on a friendly solution.

“We are trying to say that, with GIP, that if you, Suez, find an agreement with Veolia, then we will back that agreement,” he added.

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