European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Suez - Veolia Tussle: Ardian and GIP Enter the Fray

Event-Driven

Finally, both parties avoided taking the public backlash to new highs (on the Suez AGM). On 12 April, <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> and <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a> publicly smoked the peace pipe by <a href="https://www.veolia.com/sites/g/files/dvc4206/files/document/2021/04/PR-Agreement-Veolia-Suez-EN.pdf" target="_blank" rel="noopener">announcing an agreement</a> on the key T&amp;Cs of a merger to create the "World Champion of Ecological Transformation" (a global water and waste giant), with aggregate proforma revenues of €37 bn.
<ul>
<li>
The offer price is increased from €18 per share to €20.5 per share.
</li>
<li>
Veolia has committed funds to complete the transaction, which will be financed by a bridging loan with a banking syndicate.
</li>
<li>
Both parties have agreed to enter into definitive merger agreements by 14 May.
</li>
<li>
Veolia share price increased by 9.7%, whilst that of Suez increased by 7.7%.
</li>
<li>
Engie, controlled by the French State, will receive compensation for the improvement of the purchase offer.
</li>
</ul>
The improved offer represents:
<ul>
<li>1.5x EV/Fwd revenue, 8.1x EV/EBITDA and 27.4x Fwd P/E.</li>
<li>an implied EV of €25,574 mn and implied equity value of €13,103.6 mn.</li>
<li>€3.2 bn more than the first offer; in spite of that, Veolia's 5-year CDS has barely moved.</li>
</ul>
To avoid competition problems with regulators, a large part of the French assets-and others in Italy, Asia and Africa will be segregarded in a new society, which will not be part of the resulting group. This new company, whose assets will be acquired by the Galus Funds Ardian and Meridiam, GIP, and the Public Bank Caisse des Dépôts, among others, will have a turnover about €7 bn.
The rationale is of the merger is to create a "super French champion" in rising markets such as recycling or energy production based on waste or water resources (fragmented markets), which will have the economic support of new world plans in infrastructures and the impulse of the energy transition.
Suez has had a good run and I have been long since the outset. Now after two price increases, a PR offensive, and 32% gain over the initial price, this offer should be considered final. 
With this agreement, Veolia culminates an integration plan that it began last summer, when it acquired a 29.9% stake in Suez from Engie (at €15.5, then revised to €18.0) and which, since then, Suez had resisted. The stake of Veolia in Suez bars any interloper attempt.
This is a rock solid trade, albeit the gross spread is an unexciting 3.2% on a deal that may take up to a year from now to close. Long TP €20.5, and monitor to add on any dip.

Finally, both parties avoided taking the public backlash to new highs (on the Suez AGM). On 12 April, Veolia Environnement SA (VIE FP) and Suez (SEV FP) publicly smoked the peace pipe by announcing an agreement on the key T&amp;Cs of a merger to create the "World Champion of Ecological Transformation" (a global water and waste giant), with aggregate proforma revenues of €37 bn.


The offer price is increased from €18 per share to €20.5 per share.


Veolia has committed funds to complete the transaction, which will be financed by a bridging loan with a banking syndicate.


Both parties have agreed to enter into definitive merger agreements by 14 May.


Veolia share price increased by 9.7%, whilst that of Suez increased by 7.7%.


Engie, controlled by the French State, will receive compensation for the improvement of the purchase offer.


The improved offer represents:

1.5x EV/Fwd revenue, 8.1x EV/EBITDA and 27.4x Fwd P/E.
an implied EV of €25,574 mn and implied equity value of €13,103.6 mn.
€3.2 bn more than the first offer; in spite of that, Veolia's 5-year CDS has barely moved.

To avoid competition problems with regulators, a large part of the French assets-and others in Italy, Asia and Africa will be segregarded in a new society, which will not be part of the resulting group. This new company, whose assets will be acquired by the Galus Funds Ardian and Meridiam, GIP, and the Public Bank Caisse des Dépôts, among others, will have a turnover about €7 bn.
The rationale is of the merger is to create a "super French champion" in rising markets such as recycling or energy production based on waste or water resources (fragmented markets), which will have the economic support of new world plans in infrastructures and the impulse of the energy transition.
Suez has had a good run and I have been long since the outset. Now after two price increases, a PR offensive, and 32% gain over the initial price, this offer should be considered final. 
With this agreement, Veolia culminates an integration plan that it began last summer, when it acquired a 29.9% stake in Suez from Engie (at €15.5, then revised to €18.0) and which, since then, Suez had resisted. The stake of Veolia in Suez bars any interloper attempt.
This is a rock solid trade, albeit the gross spread is an unexciting 3.2% on a deal that may take up to a year from now to close. Long TP €20.5, and monitor to add on any dip.

Suez

Suez - Veolia: Peace Pipe