French water wars: Veolia ups ante in hostile Suez takeover bid

French waste and water management company Veolia has said that it intends to push forward with its bid to acquire smaller competitor Suez despite emerging legal issues and a warning from the Élysée over the increasingly hostile takeover.

The two companies are historic competitors and were formed from 19th-century water companies to become global players, but the standoff between them has quickly descended into tit-for-tat with Suez doing its best to fend off Veolia's increasingly aggressive advances.

Veolia believes that a merger between the two would enable both companies to stand against emerging rivals, particularly in China. The company upped the ante over the deal again, by reneging on a promise that it would only move ahead if the Suez board gave the green-light.

Veolia's latest offer is €18 per share for the 70.1% stake in Suez that it does not own, a total value of €11.3 billion, though when making the offer, it said that thus far Suez had resisted all attempts to engage.

“We maintain that our deposited offer is valid,” Veolia Chief Executive Antoine Frerot told reporters on Monday, adding that it was up to the French market regulator, the AMF, to make a ruling on the offer.

The move was criticised as an unfriendly manoeuvre by French Finance Minister Bruno Le Maire, but he did tell Europe 1 radio that the offer would be passed on to the AMF.

“This offer breaches commitments made several times by Veolia,” said Le Maire, who also said that a destructive war between the two companies was undesirable. 

Veolia purchased the 29.9% stake of Suez that it holds in October 2020 from utility provider Engie, which the French government is a top shareholder. 

The state had directly instructed Veolia that its approach to Suez must remain friendly, though this was criticised by some shareholders as government interference.

Citing concerns about job losses, Suez has so far resisted Veolia's attempts at a takeover, offering its backing instead to other suitors, such as private equity firm Ardian.

Suez said that Veolia had been ordered by a court not to launch a takeover bid without backing from the Suez board.

Veolia countered by saying that it had made the offer before receiving the court order.

Reaching the stage where Suez investors can tender their shares may yet take months, however, with more legal hurdles, management tussles as well as talks with antitrust regulators in Brussels set to run their course.

Suez' annual shareholder meeting in the spring may mark the next tipping point, as Veolia may make a move against Suez' management unless the two sides have come to an agreement by then.

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