Veolia & Suez reach deal, ending France's longest takeover battle

French waste and water group Veolia has reached a deal to acquire its long-standing arch rival Suez, ending one of the country's hardest-fought and bitterest corporate takeover disputes in years and reshaping the waste and water market.

Following months of ferocious conflict, as Suez strived to remain independent, the world's two largest waste and water groups announced earlier that they had reached a deal of €20.50 per share - a figure that values Suez' equity at close to €13 billion, according to Veolia.

Shares in Suez rose 7.5% to €19.80 by Midday in Paris, with Veolia's shares rising by over 9%.

The two groups have been locked in public battle since last August, when Veolia purchased 29.9% of Suez from French energy group Engie, saying that it wanted to launch a full bid for its rival. Engie is also set to receive a top-up on the price it received at the time, according to the FT.

Suez made many attempts to bat off the takeover bid - refusing to engage, putting up several legal obstacles, threatening to divest assets and putting together an alternative offer. Ultimately the takeover bid turned fully hostile in February.

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

"I am particularly pleased to announce today the conclusion of an agreement between Suez and Veolia that will enable the construction of the world champion of ecological transformation," said Veolia CEO Antoine Frérot.

Philippe Varin, Suez' Chairman of the Board of Directors said: "We have been calling for a negotiated solution for many weeks and today we have reached an agreement in principle that recognises the value of Suez. We will be vigilant to ensure that the conditions are met to reach a final agreement that will put an end to the conflict between our two companies and offer development prospects.”

French finance minister Bruno Le Maire said that he was "delighted" that the two had come to a deal. The state became deeply involved in the dispute, both in its role as a shareholder at Engie and by taking the steps to attempt mediation between the two.

The new combined business will have revenues of around €37 billion. The two groups have agreed to enter into definitive merger agreements by the middle of next month.

According to a Veolia press release, a "new Suez" will be created, "forming a coherent and sustainable group . . . with revenues of around €7 billion". The new company will be made up of water and waste operations in France as well as some international assets such as those in Italy, India and parts of Africa.

The new, smaller Suez will have an employee shareholder base capped at 10% and will be bought by private equity groups GIP, Ardian and Meridiam as well as the French state investment bank Caisse de Dépôts, all of which were allied with one of the two companies during the hostilities.

Frérot said that the majority of new Suez shareholders will be French and that the assets involved would be sold for a price that is "coherent" with the overall deal.

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The deal will also terminate an already agreed sale of assets in Australia, deemed strategic by Veolia, and neutralise a "poison pill" put in place by Suez, whereby a Netherlands-based foundation would hold its water assets in France, the board members of which would have veto rights of disposals.

The Australian asset sales and the Dutch foundation were designed to increase pressure on Veolia to come to an agreement. Suez was also put under pressure to reach a deal with Veolia threatening to vote its boards out at this summer's shareholders' meeting.

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