By Barney Smith

In October and November 2020 Greenbarrel duly recorded the opening salvoes in the fight between Veolia and Suez, the world’s two largest environmental services companies (both French).  The battle was joined in the summer of 2020 after Veolia purchased 29.9 per cent of Suez from another French company, Engie, which decided to sell its shares in Suez to fund an expansion into renewables.

We ended the initial piece with the thought that this one “Could run and run.” And it did. But now, like all good things, the end is in sight for one of France’s most bitter takeover fights for years, though Veolia’s offer was only adjudged formally hostile in February 2021.

According to one estimate, the combined company will have total revenues of some 37 Billion Euros, a veritable “World champion of the ecological transition” as Frerot, the CEO of Veolia, has dubbed it. Certainly the new combined grouping will be comfortably the largest waste and water company in the world (though It is worth pointing out that the deal still has to receive the formal approval of the various competition authorities, including Brussels.)

A somewhat improved offer for those Suez shares which it did not already own finally enabled Veolia to prevail; Engie is to receive a further payment to reflect the late add-on to the original price; Suez will lose its independence, but, interestingly, one of the elements of the final deal is the carving out of a “New” Suez which will have an estimated 7 billion euros in revenue and crucially will contain the French municipal water projects which were always going to be a stumbling block to the proposed merger.

The “new” Suez, to be sold by Veolia at a price which reflects the rest of the deal, is supposed to be mostly owned by the private equity groups which were involved in the battle, on one side or the other, though it is said that some reserve has been expressed at the resulting outcome by Ardian, the financial grouping which at one time Suez hoped would rescue them from the unwanted attentions of Veolia.

Further key elements in the final deal were the unravelling of Suez’ “poison pill” actions, including crucially the proposal to transfer the French water projects to the control of a foundation set up under Dutch, not French, law.

The French Minister of Finance, Bruno le Maire, is said to be “delighted” that Veolia and Suez had finally reached a deal. That is entirely understandable for a lofty, Ministerial point of view. But, the Minister was originally involved because the French State is a shareholder in Engie (and as such voted against the sale to Veolia).

Perhaps one question for the future is whether the somewhat rough tactics successfully deployed by Frerot have in some way weakened his standing among the French elite. As we have said before, they do things rather differently in France and any reaction may not be immediately visible to the naked eye.