After nearly eight months of fierce resistance from Suez’s management, Veolia unlocked a deal, lifting its offer price and pledging to sell back a bigger part of its French water rival to maintain competition. The deal gives Suez an equity value of about 13 billion euros ($15 billion). Veolia agreed to pay 20.50 euros a share for the roughly 70% of Suez it doesn’t already own, according to a statement. It bought its initial stake in the company last year for 18 euros a share from Engie SA, which will benefit from the revised takeover price.
The transaction will create a global giant in waste and water services under the Veolia umbrella, with annual revenue of about 37 billion euros. It will also leave some elements of Suez to continue as a new business owned by a variety of French shareholders and private equity groups. “Given that we’ll get most of the assets that we really wanted for our project, this deal will largely create value for Suez shareholders,” Frerot said.
Suez shares traded 7.6% higher at 19.84 euros by 1:26 p.m. in Paris. Veolia jumped 8.7%. The two companies will enter into a definitive agreement on May 14. The transaction requires approval from competition authorities in several countries. “For Veolia, this agreement ends months of uncertainty, which has held back the shares,” Barclays analysts saidin a research note. “Although we’re still missing more detailed financial information we believe investors will take the view that this agreement will be realized leading to a win-win for both.”