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Suez Receives Friendly Takeover Proposal From Ardian & GIP Amid Takeover Fight With Veolia

The French-based water and waste management company Suez has received an alternate friendly offer from two private equity firms, Ardian SAS and Global Infrastructure Partners (GIP), amid the bitter takeover attempt by its major shareholder and arch-rival, Veolia Environnement SA.

Ardian-GIP Proposal

Ardian SAS and GIP proposed the offer Sunday saying that they would pay 18 euros per share ($21) for acquiring Suez, matching Veolia’s offer valuing Suez at 11.3 billion euros ($13.65 billion). However, Ardian made it clear that it was in no way making a counter takeover offer.

Veolia’s Hostile Attempt

The French transnational company Veolia bought around 30% stake in Suez last year from Engie, another French energy firm 22% of which is owned by the French state, even though the state voted against the deal. Veolia’s takeover could result in a global giant supplying waste and water management services worldwide. However, Suez’s board has been trying to fend off the attempt.

Suez’s Response

To make the takeover more difficult, Suez created a poison pill. Poison pills allow the existing shareholders to buy more shares at a discount, resulting in diluted ownership of the hostile bidder. It would effectively require the approval of the current board for the sale of Suez to occur. However, a French court ordered the water giant not to make the mechanism permanent without shareholder approval. Suez is now trying to overturn the decision.

Suez’s & Veolia’s Reaction To The Latest Ardian-GIP Offer

The latest Ardian-GIP proposal has been welcomed by Suez, seeing it as a faster way out of the uncomfortable situation created by Veolia. CEO Bertrand Camus said that the offer will preserve jobs and competition in the French market, pointing out that shareholders should support it because Veolia’s attempt is essentially blocked now.

Veolia, on the other hand, is adamant to keep ownership of its existing stake in Suez. The state-backed giant refused to withdraw its offer, saying that any deal requiring the sale of its stake in Suez will be considered hostile.

State Control

French government plays a vital role in the whole twisted situation. Previously, it wanted a friendly transaction between Suez and Veolia, being very specific that any alternate deal should maintain French control over the firm.

Last week, Canada’s Couche-Tard tried to acquire French retailer giant Carrefour SA. The deal quickly collapsed as it faced opposition from the French state. Moreover, non-EU companies have to deal with extra scrutiny by the government who has made it clear that it would retain control of any strategic assets.

What Now

Suez has said that it is now willing to talk to Veolia to come up with a solution that is in the interest of all concerned parties. The last time the two rivals were close to an acceptable deal was when Veolia proposed an expanded carve-out worth 5 billion euros in annual revenues which could be run by the existing management. Now, people with knowledge have said that an alternative could be Veolia accepting some assets in exchange for withdrawing.

Shares of Suez are up 2.83% to 17.43 euros – still below the proposed takeover offers. Veolia is down 3.11% to 22.41 euros.

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