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.

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

Event-Driven

<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> rejects <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a>'s proposal to sell assets to Ardian and GIP.
<ul class="">
<li>Ardian and GIP have now offered to buy a new entity that would encompass Suez's water and waste units, as well as the international water and technology businesses (with c. €9.1 bn turnover, or 53% of Suez’s 2020 turnover), for €12.9 bn, roughly equivalent to Suez's current market value.</li>
<li>
On 20 March, the offer price for of all the relevant activities was increased to €20 per share (cum dividend).
<ul>
<li>
For an implied total equity value of €12,623.2 mn and a total implied EV of €25,093.6 mn.
</li>
<li>
This represents 1.5x EV/Fwd Revenue, 8.1x EV/Fwd EBITDA and 27.5x Fwd P/E.
</li>
<li>
As of 21 March, the transaction was unanimously approved by the Board of Suez. The offer is contingent on Veolia withdrawing its hostile bid across Suez and agreeing to divest some assets as part of a negotiated deal.
</li>
<li>Even so, the Ardian-GIP proposal "is not a counter offer" and is conditional on an agreement between Suez and Veolia.</li>
</ul>
</li>
<li>Suez is "offering" Veolia two solutions to deactivate some of the obstacles it has put in place to make the takeover more difficult:
<ul>
<li>let Ardian and GIP acquire the bits they are interested in (over half of Suez) and increase (Veolia's) offer from €18 to €20 per share, or</li>
<li>increase the offer to €22.5 per share.</li>
</ul>
</li>
<li>
Alternatively, the funds said that if Veolia withdraws its offer within six months, the consortium could consider the filing of a €20 per share (cum dividend) tender offer for the whole of Suez, subject to support of the Suez's Board, the Intersyndicale, and the public authorities; due diligence; and the consortium’s capacity to finance such an offer.
</li>
<li>
Suez has also threatened that if no agreement is reached by 20 April, it would go ahead with a plan that could potentially involve selling some assets in which Veolia is interested.
</li>
<li>
Veolia immediately rejected the proposal, saying it was sticking to its original plan. "The takeover offer made by Veolia remains irrevocable".
</li>
</ul>
<ul>
<li>
Suez's proposal is the last move in a bitter battle between both companies that is being deployed in courts and involves a lot of PR. The French government has so far failed to promote an amicable agreement.
</li>
<li>
Both Suez and Veolia seem ready to lock horns at the AGM, to be held in May or June, unless Veolia gets cold feet and decides Suez is not worth all the hassle. It is probably still soon for that, but if Veolia withdraws, it would still obtain an extraordinary profit of c. €382 mn (before taxes).
</li>
<li>
The share price of Suez has surpassed the €18 per share level of Veolia's bid and seems to be heading towards €20 per share of Ardian's proposal, which would materialize if Veolia withdraws its offer. Recommendation is LONG Suez, TP €20.
</li>
</ul>

Veolia Environnement SA (VIE FP) rejects Suez (SEV FP)'s proposal to sell assets to Ardian and GIP.

Ardian and GIP have now offered to buy a new entity that would encompass Suez's water and waste units, as well as the international water and technology businesses (with c. €9.1 bn turnover, or 53% of Suez’s 2020 turnover), for €12.9 bn, roughly equivalent to Suez's current market value.

On 20 March, the offer price for of all the relevant activities was increased to €20 per share (cum dividend).


For an implied total equity value of €12,623.2 mn and a total implied EV of €25,093.6 mn.


This represents 1.5x EV/Fwd Revenue, 8.1x EV/Fwd EBITDA and 27.5x Fwd P/E.


As of 21 March, the transaction was unanimously approved by the Board of Suez. The offer is contingent on Veolia withdrawing its hostile bid across Suez and agreeing to divest some assets as part of a negotiated deal.

Even so, the Ardian-GIP proposal "is not a counter offer" and is conditional on an agreement between Suez and Veolia.


Suez is "offering" Veolia two solutions to deactivate some of the obstacles it has put in place to make the takeover more difficult:

let Ardian and GIP acquire the bits they are interested in (over half of Suez) and increase (Veolia's) offer from €18 to €20 per share, or
increase the offer to €22.5 per share.



Alternatively, the funds said that if Veolia withdraws its offer within six months, the consortium could consider the filing of a €20 per share (cum dividend) tender offer for the whole of Suez, subject to support of the Suez's Board, the Intersyndicale, and the public authorities; due diligence; and the consortium’s capacity to finance such an offer.


Suez has also threatened that if no agreement is reached by 20 April, it would go ahead with a plan that could potentially involve selling some assets in which Veolia is interested.


Veolia immediately rejected the proposal, saying it was sticking to its original plan. "The takeover offer made by Veolia remains irrevocable".




Suez's proposal is the last move in a bitter battle between both companies that is being deployed in courts and involves a lot of PR. The French government has so far failed to promote an amicable agreement.


Both Suez and Veolia seem ready to lock horns at the AGM, to be held in May or June, unless Veolia gets cold feet and decides Suez is not worth all the hassle. It is probably still soon for that, but if Veolia withdraws, it would still obtain an extraordinary profit of c. €382 mn (before taxes).


The share price of Suez has surpassed the €18 per share level of Veolia's bid and seems to be heading towards €20 per share of Ardian's proposal, which would materialize if Veolia withdraws its offer. Recommendation is LONG Suez, TP €20.



Suez - Veolia Tussle: Ardian and GIP Enter the Fray