Engie to Study Veolia Bid for Suez Stake as Ardian Drops Out

(Bloomberg) -- French private-equity firm Ardian SAS won't make an immediate offer to buy most of Engie SA's stake in Suez SA, leaving the French water and waste utility facing a hostile takeover from Veolia Environnement SA.

Engie's board, which has already said it's happy with Veolia's 3.4 billion-euro ($4 billion) bid for its 29.9% stake in Suez, is due to meet later Monday to consider the proposal. The offer expires in a few hours, and the French government, which owns 24% of Engie, has signaled it would back only a friendly takeover deal amid job concerns, raising doubts about the outcome of the board meeting.

Suez, which had been pushing a offer from Ardian as an alternative to Veolia's approach, reiterated in a statement on Monday that it still considers any bid from its French rival to be hostile. Suez last month created a so-called poison pill in a bid to make antitrust issues more difficult for its suitor.

“In order to preserve the interest of all its shareholders and stakeholders, the board confirms that it will put all the means at its disposal to avoid a creeping takeover or de facto control,” Suez said in the statement.

Suez's shares fell 3% to 15.59 euros at 4:16 p.m. in Paris after Ardian pulled out, opened the doors for a potentially prolonged and acrimonious takeover saga. Veolia declined 1.1% while Engie slid 0.2%.

The acquisition fight started at the end of August, when Veolia offered to buy the Engie stake in Suez. That would eventually pave the way for a full takeover as Veolia attempts to cement its global leadership in environmental services.

Hostile Takeover

Veolia, which raised its bid to 18 euros a share on Sept. 30 from an earlier 15.50 euros, said on Sunday it won't pursue a hostile takeover if it acquires the stake from Engie. The company said it was providing such a guarantee following demands from Engie's board.

In the event of a deal, Veolia would need to address antitrust issues, which it has said could take as many as 18 months. It plans to sell Suez's French water activities, and has offered to offload some other international water assets to a single buyer. Overall revenue of these assets would amount to 5 billion euros, including 2.2 billion euros for the French water holdings, Veolia said in a statement Sunday.

The government has tried and failed to broker an end to hostilities in recent weeks. It's been pushing Veolia to sell more water assets to a single buyer with a view to keeping a sizable rival to Veolia in that domain.

In a letter to Veolia Chief Executive Officer Antoine Frerot, Suez Chairman Philippe Varin said Sunday that the company “showed goodwill and worked hard to find a solution that could be acceptable to everyone,” but Veolia's proposal fell short of preserving two French global players in environmental services.

Ardian decided not to make an offer to leave room for ongoing talks, the Paris-based fund said in a statement Monday. The private equity firm had worked on an offer backed by Suez's employees and its board, that would require six weeks of due diligence.

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