Engie agrees to sell Suez stake despite French state’s dissent

In this news, we discuss the Engie agrees to sell Suez stake despite French state’s dissent.

PARIS (Reuters) – French public utility Engie ENGIE.PA has agreed to sell most of its stake in water and waste treatment company Suez SEVI.PA to Veolia VIE.PA, paving the way for a takeover despite a contrarian vote from the French government at its board meeting on Monday.

Veolia’s plan to buy the 29.9% stake and then launch a takeover bid, with the ambition to strengthen its global reach in a highly fragmented industry, has met fierce opposition from Suez.

He was successful in persuading a majority of Engie’s board members after raising his equity offer to 3.4 billion euros ($ 4 billion) and offering assurances to keep any subsequent offer favorable, ensuring finally to be able to take the next step.

But the French state – a major shareholder in Engie, and which had sought to mediate between the parties, in particular by urging them to take their time – voted against the offer, the finance ministry said.

Dissent has raised eyebrows in France, where the government usually has strong influence over companies in which it has a stake.

Engie chairman Jean-Pierre Clamadieu told reporters relations with the state were still good, but the company and the government had defended different interests.

The state had waited for Veolia and Suez to bury the hatchet before the stake was sold, Clamadieu said, but added that he believed that would only happen after the bloc was eliminated.

“I witnessed the start of a dialogue,” Clamadieu said of discussions between Suez and Veolia in recent days, adding that he was convinced they would find common ground.

THE REMAINING OBSTACLES

Veolia and its little rival Suez manage a large part of France’s water supply and are both major players at the international level in water and waste management. Veolia argued that a combined French champion would be better equipped to take on rivals emerging from China, while the deal would also result in cost savings of € 500m in the first year.

Veolia’s offer for Engie’s stake in Suez, at € 18 per share, would value the entire Suez group at more than € 11 billion.

But Suez vehemently opposed Veolia’s approach, calling it hostile and warning it could lead to job losses.

Last week, several French parliamentarians, mostly from President Emmanuel Macron’s party, also questioned the industrial logic of the agreement and the rush to close it without thinking. alternatives.

Suez had pleaded for more time to find another suitor. But the only one that emerged, private equity firm Ardian, left earlier on Monday, saying it took six weeks to do full due diligence on any offer.

Veolia has pledged not to make a hostile offer on Suez and said it will seek the blessing of the company’s board of directors for its takeover bid.

Suez however tried to put other obstacles, which remain to be solved, in particular after having created a foundation to house its French water activity, complicating any takeover.

Engie, which is trying to simplify its cumbersome structure, had reserved Suez’s stake for the sale over the summer, and announced on Monday that it would realize a capital gain of 1.8 billion euros before tax on the sale.

Reporting by Gwenaelle Barzic, Sarah White and Geert De Clercq; Editing by Mark Potter, Pravin Char and Lisa Shumaker

Original © Thomson Reuters

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