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

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

Event-Driven

After months of repeated attempts to secure a friendly buyout, on the evening of Sunday 7 February, <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> continued its 80's style public offensive and <a href="https://www.veolia.com/sites/g/files/dvc2491/files/document/2021/02/PR-Veolia-announces-filing-of-public-tender-offer-for-the-entire-share-capital-of-Suez-070221-ENG.pdf" target="_blank" rel="noopener">decided to formally launch a takeover offer to minority shareholders</a>,  for the 70.1% it does not own in <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a>.
<ul>
<li>at a price of € 18.00 cum dividend per share, for a total of €7.9 bn.</li>
<li>Following the presentation of the offer, Suez has reacted immediately saying that legally, Veolia could not present a takeover bid, as it would mean a break in the amicable commitment between both parties. Suez's chairman has said the offer is hostile and undervalues Suez.</li>
<li>First thing this morning, a French court has decided to stop Veolia's offer for the moment.</li>
<li>The French state, which was initially in favor of the Veolia project, seems to put some distance from the tussle in recent weeks and urges dialogue between both parties. “French capitalism can’t be a war of everyone against everyone,” French Finance Minister Bruno Le Maire said in an interview with Europe 1 radio. “Everyone has to be reasonable, wise and have an idea of general public interest because it is a question of thousands of jobs.”</li>
</ul>
If the tender offer is opened, it will require the merger control approval by the European Commission. Veolia reserves the right to waive the said condition.
Going hostile may have been the only way to proceed given the delaying maneuvers by Suez. As the chances to finding a friendly deal were increasingly dim, Veolia should sooner rather than later exercise the power of its majority.
<ul class="">
<li>In this case, the French government cannot act in the same fashion as in CoucheTard bid for Carrefour, because the companies involved are French. </li>
<li>A combined Suez-Veolia would have cost-advantage (economies of scale) and could greatly benefit from the energy transition programs to a low-carbon economy.</li>
<li>Nevertheless until that point, there is a long and winding road: getting rid of the poison pill (transfer of assets to a Dutch foundation), forbidding the disposal of the French water assets in the next four years, and Suez’s planned sale of key assets. Last but not least, softening the stance of French union who have so far sided with Suez's management in this trench war.</li>
<li>The clock is ticking for Suez and Veolia could potentially use its majority holding to unseat Suez's management at Suez’s AGM.</li>
</ul>
Veolia’s CEO said its offer will be open once it gets antitrust clearance, which should take 8 to 14 months (finalized in Q1 2022).
Gross spread is 5%. Reiterate long SZE FP, TP €18 per share.

After months of repeated attempts to secure a friendly buyout, on the evening of Sunday 7 February, Veolia Environnement SA (VIE FP) continued its 80's style public offensive and decided to formally launch a takeover offer to minority shareholders,  for the 70.1% it does not own in Suez (SEV FP).

at a price of € 18.00 cum dividend per share, for a total of €7.9 bn.
Following the presentation of the offer, Suez has reacted immediately saying that legally, Veolia could not present a takeover bid, as it would mean a break in the amicable commitment between both parties. Suez's chairman has said the offer is hostile and undervalues Suez.
First thing this morning, a French court has decided to stop Veolia's offer for the moment.
The French state, which was initially in favor of the Veolia project, seems to put some distance from the tussle in recent weeks and urges dialogue between both parties. “French capitalism can’t be a war of everyone against everyone,” French Finance Minister Bruno Le Maire said in an interview with Europe 1 radio. “Everyone has to be reasonable, wise and have an idea of general public interest because it is a question of thousands of jobs.”

If the tender offer is opened, it will require the merger control approval by the European Commission. Veolia reserves the right to waive the said condition.
Going hostile may have been the only way to proceed given the delaying maneuvers by Suez. As the chances to finding a friendly deal were increasingly dim, Veolia should sooner rather than later exercise the power of its majority.

In this case, the French government cannot act in the same fashion as in CoucheTard bid for Carrefour, because the companies involved are French. 
A combined Suez-Veolia would have cost-advantage (economies of scale) and could greatly benefit from the energy transition programs to a low-carbon economy.
Nevertheless until that point, there is a long and winding road: getting rid of the poison pill (transfer of assets to a Dutch foundation), forbidding the disposal of the French water assets in the next four years, and Suez’s planned sale of key assets. Last but not least, softening the stance of French union who have so far sided with Suez's management in this trench war.
The clock is ticking for Suez and Veolia could potentially use its majority holding to unseat Suez's management at Suez’s AGM.

Veolia’s CEO said its offer will be open once it gets antitrust clearance, which should take 8 to 14 months (finalized in Q1 2022).
Gross spread is 5%. Reiterate long SZE FP, TP €18 per share.

Suez

Veolia - Suez: Enough Is Enough