Veolia, Suez agree $15 billion utilities merger after bitter spat

PARIS (Reuters) -Veolia and Suez on Monday announced a merger deal worth nearly 13 billion euros ($15.44 billion) after months of wrangling between the two French waste and water management companies.

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Rivals since the 19th century, Veolia pursued the smaller Suez arguing that together they could better fight off new global challengers emerging in China.

The companies would also be better placed to innovate in growth areas such as environmental services and recycling, Veolia said.

The agreement values Suez at 20.50 euros ($24.4) per share or 12.8 billion euros, the companies said, after Veolia, which already owns 29.9% of the group, hiked its bid price from 18 euros.

Shares in Veolia were up over 8% and Suez up 7.6% at 0924 GMT following the announcement.

Paris-based Suez has rebuffed Veolia’s advances since its rival bought a stake in the firm last October, and in February it rejected a 11.3 billion euro takeover bid.

The groups have clashed in court and Suez has set up defences including a foundation to ringfence its French water business, which will now be deactivated.

Veolia CEO and chairman Antoine Frerot told reporters that Gerard Mestrallet, who used to chair Suez and also French utility Engie, had helped broker talks between the companies in recent days.

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Frerot met Suez Chairman Philippe Varin over the weekend to clinch the deal, a source familiar with the discussions said.

As part of the agreement, and in part to ease antitrust problems, some of Suez’s assets will be spun off into a new entity with around 7 billion euros in revenue.

Investment funds Meridiam, Ardian and Global Infrastructure Partners as well as state-backed Caisse des Depots and employees will be shareholders in the “new Suez”. A price for that carve-out has not yet been set.

That new entity will mainly comprise Suez’s French water activities, but also some international assets, including in Italy, the Czech Republic, India and Australia.

Pressure to resolve the matter had been mounting ahead of Suez’s annual shareholder meeting later this spring. Veolia had been trying to get permission to vote which could have resulted in moves to oust Suez’s management.

As part of the takeover, members of Suez management will be represented at several levels, Frerot told reporters. Frerot said Suez CEO Bertrand Camus would have a role if he wished to, but that he “understood it was not his preference”.

Suez had no immediate comment on Camus’s job.

($1 = 0.8415 euros)

Reporting by Sudip Kar-Gupta, Matthieu Protard and Sarah White; editing by Jan Harvey and Jason Neely

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