European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 7 January, <a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia Environnement SA (VIE FP)</a>  increased its bear-hug on <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a> by sending an open letter to the Board of Suez on 7 January and appealing to shareholders at the same time.
The offer, which is not formal, values ​​Suez at €11.3 bn, but Suez still considers it hostile and is trying to put pressure, while the French government continues to quietly mediate for an agreement.
Veolia intends to file a voluntary offer at €18 per share - the same price at which it acquired a 29.9% stake from Engie-, which values ​​100% of Suez at c. €11,252 mn, an implied EV of c. €22,180 mn.
<ul>
<li>The price tag for the remaining stake is €7,887.5 mn.</li>
<li>This represents a 13.2% premium to the VWAP over the 3 months prior to 7 January, and a c. 8.4% premium to the prior trading session.</li>
<li>3.4x EV/Fwd Revenue, 19.9x EV/Fwd EBITDA and 33.1x P/Fwd EPS (source: Capital IQ consensus).</li>
<li>The purchase price will be reduced by any distribution or adjusted to take to account of any capital transaction.</li>
</ul>
The core of the dispute remains unresolved, and to top it off, there is not yet any agreement between the parties involved as to when that will happen.
Regarding the transfer of the French water assets of Suez to a Dutch foundation, Veolia now has to reverse that move. Veolia could exercise its voting power at the next Suez's AGM (likely next summer) and replace the Board of Suez. 
Independently of what happens, Veolia will remain a majority shareholder unless it can be bought out at a price higher than €18 per share. The future does not look pretty for Suez's Board. Both parties should reach an agreement before the AGM.
Recommendation is LONG Suez, TP €18.
<ul>
<li>Suez is trading at a gross spread to the offer of c. 7.7%, which seems adequate given the hostile situation, the time deals in the sector take to complete (all relevant authorisations could take between 12 to 18 months, according to Veolia).</li>
<li>The share price of Suez is slowly but steadily approaching €18.</li>
</ul>

On 7 January, Veolia Environnement SA (VIE FP)  increased its bear-hug on Suez (SEV FP) by sending an open letter to the Board of Suez on 7 January and appealing to shareholders at the same time.
The offer, which is not formal, values ​​Suez at €11.3 bn, but Suez still considers it hostile and is trying to put pressure, while the French government continues to quietly mediate for an agreement.
Veolia intends to file a voluntary offer at €18 per share - the same price at which it acquired a 29.9% stake from Engie-, which values ​​100% of Suez at c. €11,252 mn, an implied EV of c. €22,180 mn.

The price tag for the remaining stake is €7,887.5 mn.
This represents a 13.2% premium to the VWAP over the 3 months prior to 7 January, and a c. 8.4% premium to the prior trading session.
3.4x EV/Fwd Revenue, 19.9x EV/Fwd EBITDA and 33.1x P/Fwd EPS (source: Capital IQ consensus).
The purchase price will be reduced by any distribution or adjusted to take to account of any capital transaction.

The core of the dispute remains unresolved, and to top it off, there is not yet any agreement between the parties involved as to when that will happen.
Regarding the transfer of the French water assets of Suez to a Dutch foundation, Veolia now has to reverse that move. Veolia could exercise its voting power at the next Suez's AGM (likely next summer) and replace the Board of Suez. 
Independently of what happens, Veolia will remain a majority shareholder unless it can be bought out at a price higher than €18 per share. The future does not look pretty for Suez's Board. Both parties should reach an agreement before the AGM.
Recommendation is LONG Suez, TP €18.

Suez is trading at a gross spread to the offer of c. 7.7%, which seems adequate given the hostile situation, the time deals in the sector take to complete (all relevant authorisations could take between 12 to 18 months, according to Veolia).
The share price of Suez is slowly but steadily approaching €18.


The moving parts of <a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia Environnement SA (VIE FP)</a> 's bear hug on <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a> start to fit in. Veolia wins the first round in this hostile bid by negotiating a purchase of 29.9% of Suez from Engie.
Nevertheless, a judge suspends Veolia's purchase of 29.9% of Engie's stake in Suez and says Suez's unions should be consulted. Veolia's purchase is not canceled, but delays the whole full takeover plan.
Let us remember that the whole chain of events was unleashed by Engie's plans to adopt a lighter balance-sheet. Subsequently, Veolia decided to make an offer for Engie's stake in Suez, and use it to launch a full takeover bid for Suez.
Its objective, if its rival does not sell assets or change the perimeter, is to pay 18 euros for the remaining shares, which values Suez ​​at €11,252 million.
Veolia is cannily putting now pressure on Suez (as it previously somehow did on Engie) and proposes to Suez to allow each party a period of 6 months ending on March 31st 2021, during which the both companies will undertake their best efforts to reach an agreement to successfully implement the project carried out by Veolia. The following stage would concern antitrust remedies, and the following one would be to line up the funds required for the full takeover bid.
Although this is a puzzle with several moving parts, Veolia appears to be strongly committed to the acquisition of Suez and to have a clear vision of a combined future. The implementation of Veolia's plans could give birth to a leading utility in the water and waste markets, with a pro-forma 2020 income of c. €43 bn (source Capital IQ consensus).
Suez is no longer trading on fundamentals. The mean implied equity value across multiples (source Capital IQ consensus), is €17.05 per share, vs. €18 per share offered by Suez, 5.5% more.
Completing the takeover will be long and cumbersome, expected to complete between end of Q3 2020 and en of Q1 2021), hence the 11.7% gross spread to the terms announced by Veolia
The bid would be likely to go ahead in my view, thus the recommendation is LONG Suez, target price €18 per share.

The moving parts of Veolia Environnement SA (VIE FP) 's bear hug on Suez (SEV FP) start to fit in. Veolia wins the first round in this hostile bid by negotiating a purchase of 29.9% of Suez from Engie.
Nevertheless, a judge suspends Veolia's purchase of 29.9% of Engie's stake in Suez and says Suez's unions should be consulted. Veolia's purchase is not canceled, but delays the whole full takeover plan.
Let us remember that the whole chain of events was unleashed by Engie's plans to adopt a lighter balance-sheet. Subsequently, Veolia decided to make an offer for Engie's stake in Suez, and use it to launch a full takeover bid for Suez.
Its objective, if its rival does not sell assets or change the perimeter, is to pay 18 euros for the remaining shares, which values Suez ​​at €11,252 million.
Veolia is cannily putting now pressure on Suez (as it previously somehow did on Engie) and proposes to Suez to allow each party a period of 6 months ending on March 31st 2021, during which the both companies will undertake their best efforts to reach an agreement to successfully implement the project carried out by Veolia. The following stage would concern antitrust remedies, and the following one would be to line up the funds required for the full takeover bid.
Although this is a puzzle with several moving parts, Veolia appears to be strongly committed to the acquisition of Suez and to have a clear vision of a combined future. The implementation of Veolia's plans could give birth to a leading utility in the water and waste markets, with a pro-forma 2020 income of c. €43 bn (source Capital IQ consensus).
Suez is no longer trading on fundamentals. The mean implied equity value across multiples (source Capital IQ consensus), is €17.05 per share, vs. €18 per share offered by Suez, 5.5% more.
Completing the takeover will be long and cumbersome, expected to complete between end of Q3 2020 and en of Q1 2021), hence the 11.7% gross spread to the terms announced by Veolia
The bid would be likely to go ahead in my view, thus the recommendation is LONG Suez, target price €18 per share.

Veolia - Suez Recap. Veolia Wins the First Round, but Suez's Unions Delay the Operation.

<a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia Environnement Sa (VIE FP)</a> announced on 30 August a firm offer to <a href="https://www.smartkarma.com/entities/engie-sa" target="_blank" data-smartkarma-citation="entities:21449:1" rel="noopener">Engie SA (ENGI FP)</a> to acquire a 29.9% stake of <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a> at €15.5 per share. If this offer is accepted by Engie, Veolia intends to launch a voluntary takeover offer for the remaining shares of Suez and estimates the process to last between 12 and 18 months. Veolia aims to create "the French World Champion of Ecological Transformation" and is banking on the increasing demand for water treatment and waste management services worldwide, especially in emerging markets.
<ul class="">
<li>Suez closed today (2 September) at €14.9 per share, a 3.8% absolute spread to the proposed takeover offer price.</li>
</ul>
Suez says that "the approach of Veolia has not been solicited and has not been discussed at all with Suez". But the announcement has almost surely all the blessings of the French government.
The transaction with Engie is highly likely to succeed, thus a full-on offer for Suez is to be expected. The offer price seems fair, 8x EV/forward EBITDA vs. 7.8x for European peers.

Veolia Environnement Sa (VIE FP) announced on 30 August a firm offer to Engie SA (ENGI FP) to acquire a 29.9% stake of Suez (SEV FP) at €15.5 per share. If this offer is accepted by Engie, Veolia intends to launch a voluntary takeover offer for the remaining shares of Suez and estimates the process to last between 12 and 18 months. Veolia aims to create "the French World Champion of Ecological Transformation" and is banking on the increasing demand for water treatment and waste management services worldwide, especially in emerging markets.

Suez closed today (2 September) at €14.9 per share, a 3.8% absolute spread to the proposed takeover offer price.

Suez says that "the approach of Veolia has not been solicited and has not been discussed at all with Suez". But the announcement has almost surely all the blessings of the French government.
The transaction with Engie is highly likely to succeed, thus a full-on offer for Suez is to be expected. The offer price seems fair, 8x EV/forward EBITDA vs. 7.8x for European peers.

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Yesterday, <a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia (VIE FP), </a>a leading water and waste management company made an unsolicited bid for a 29.9% stake in leading competitor <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a> through purchasing the stake held by <a href="https://www.smartkarma.com/entities/engie-sa" target="_blank" data-smartkarma-citation="entities:21449:1" rel="noopener">Engie SA (ENGI FP)</a> , another French utility company which recently announced it was undertaking a strategic review of its assets. We look at potential return scenarios below.

Yesterday, Veolia (VIE FP), a leading water and waste management company made an unsolicited bid for a 29.9% stake in leading competitor Suez (SEV FP) through purchasing the stake held by Engie SA (ENGI FP) , another French utility company which recently announced it was undertaking a strategic review of its assets. We look at potential return scenarios below. 

Suez: An Opportunistic or Fair Bid by Veolia?

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

At this point in time the major global indexes (MSCI ACWI, ACWI ex-US, EAFE, EM) have failed to break above their respective resistance levels, leaving us squarely in the neutral camp. We believe the aforementioned major global indexes are likely to remain below resistance or have limited upside unless and until we see more definitive signs of bottoming within cyclical value areas of the market. In this report we recap important technical levels for the major indexes and highlight actionable set-ups within the utilities, travel and leisure and consumer staples industries.

At this point in time the major global indexes (MSCI ACWI, ACWI ex-US, EAFE, EM) have failed to break above their respective resistance levels, leaving us squarely in the neutral camp. We believe the aforementioned major global indexes are likely to remain below resistance or have limited upside unless and until we see more definitive signs of bottoming within cyclical value areas of the market. In this report we recap important technical levels for the major indexes and highlight actionable set-ups within the utilities, travel and leisure and consumer staples industries.

Global Equity Strategy: Squarely in the Neutral Camp

France

Suez SA provides equipment and services for potable water supply. The Company collects, treats, and distributes drinkable water. Suez  also provides services for waste collection, recycling, recovery, treatment and disposal of urban and industrial waste. Suez serves customers worldwide.

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Suez (SEV FP)

Veolia Steps up Pressure on Suez

Recommendation is LONG Suez, TP €18. Suez is trading at a gross spread to the offer of c. 7.7%, adequate given the hostile situation and the time...

Jesus Rodriguez Aguilar

Veolia - Suez Recap. Veolia Wins the First Round, but Suez's Unions Delay the Operation.

In a puzzle with several moving parts, Veolia is strongly committed to acquiring Suez and creating a giant (pro-forma 2020 income c.€43 bn). The...

Jesus Rodriguez Aguilar

Veolia - Suez: Another French Champion

Veolia environment announced on 30 August a firm offer to Engie to acquire a 29.9% stake of Suez, at €15.5 per share.

Jesus Rodriguez Aguilar

Suez: An Opportunistic or Fair Bid by Veolia?

Yesterday, Veolia (VIE FP), a leading water and waste management company made an unsolicited bid for a 29.9% stake in leading competitor Suez (SEV...

Rickin Thakrar

Global Equity Strategy: Squarely in the Neutral Camp

At this point in time the major global indexes (MSCI ACWI, ACWI ex-US, EAFE, EM) have failed to break above their respective resistance levels,...

Vermilion Research

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