Suez Says Veolia Talks Failed, Takeover Bid Still Hostile

(Bloomberg) --

Suez SA said it still considers the takeover approach by rival utility Veolia Environnement SA to be hostile, damping any hopes that recent discussions could pave the way for a friendly tie-up between the two French giants.

“The proposal made, in particular the first step of buying a 29.9% stake of Suez from Engie, remains hostile,” Suez Chairman Philippe Varin wrote in an Oct. 4 letter to Veolia Chief Executive Officer Antoine Frerot.

The proposed purchase of the stake for 3.4 billion euros ($4 billion) would be just an opening gambit for Veolia, which wants to acquire the whole water company and create a global giant in environmental services. That ambition has sparked concern in the French government, which holds 24% of Engie SA and has said a deal must not be hurried.

An agreement between Suez and Veolia is still possible, French Finance Minister Bruno Le Maire said during a telephone briefing with reporters on Sunday.

“The government calls on both parties to resume talks in coming hours to reach a friendly offer,” the only solution that can protect the interests of employees and the country, Le Maire said.

Private-equity firm Ardian SAS is also working on an offer for the Engie stake, which has the support of Suez. Ardian's teams have been working through the weekend on an “indicative” offer that will be ready in the coming days, Le Journal du Dimanche reported on Sunday, citing Mathias Burghardt, Ardian's head of infrastructure. It will take an additional six weeks for the firm to come up with a definitive price, the newspaper added.

A spokeswoman for Engie said Sunday that the company still plans to make a decision on its Suez holding by an Oct. 5 deadline.

Veolia, which on Sept. 30 raised its bid to 18 euros a share from 15.5 euros, said earlier Sunday that it's “unconditionally” committed not to launch a hostile takeover bid for Suez after acquiring the stake from Engie. It characterized its discussions with Suez management as “constructive” and said it was providing the guarantee to not go hostile that was demanded by Engie's board to make the stake sale possible.

Suez, in a separate statement on Sunday, called Veolia's press release “misleading” and said discussions between the two companies had failed. In his letter to Frerot, Varin said Suez “showed goodwill and worked hard to find a solution that could be acceptable to everyone” but Veolia's proposal fell short.

Varin met the Veolia CEO and Engie Chairman Jean-Pierre Clamadieu for dinner on Thursday to discuss the Veolia takeover offer, French daily Le Figaro reported on Saturday. Varin also told Le Figaro on Saturday that the situation with Veolia had “changed” and that he was working to see if the takeover project could become “acceptable.”

Engie's Clamadieu is leaning toward accepting Suez's sweetened 18 euro-a-share offer for the stake, Journal du Dimanche also said Sunday.

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