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

Suez: An Opportunistic or Fair Bid by Veolia?

Event-Driven

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.