{"id":4099,"date":"2021-04-16T08:09:07","date_gmt":"2021-04-16T07:09:07","guid":{"rendered":"https:\/\/www.simtrade.fr\/blog_simtrade\/?p=4099"},"modified":"2021-04-16T08:09:07","modified_gmt":"2021-04-16T07:09:07","slug":"veolia-suez-epitome-hostile-takeover-bid","status":"publish","type":"post","link":"https:\/\/www.simtrade.fr\/blog_simtrade\/veolia-suez-epitome-hostile-takeover-bid\/","title":{"rendered":"Veolia and Suez: the epitome of a hostile takeover bid"},"content":{"rendered":"

Veolia and Suez: the epitome of a hostile takeover bid<\/h1>\n

\"<\/a><\/p>\n

In this article, Rapha\u00ebl ROERO DE CORTANZE<\/a> (ESSEC Business School, Master in Management, 2019-2022) details the Veolia-Suez saga.<\/p>\n

Since August 30, 2020, when Engie put its 29,9% stake in Suez for sale, the Veolia-Suez saga continues to make headlines.<\/p>\n

Veolia is a French company with activities in three main service and utility areas traditionally managed by public authorities: water management, waste management and energy services. Suez (formerly Suez Environnement) is a French-based utility company which operates largely in the water and waste management sectors. Suez is the largest private water provider worldwide, by number of people served.<\/p>\n

Let\u2019s go through the key stages of this saga with a view to understanding what is a hostile takeover, and why Veolia\u2019s takeover bid on Suez can be considered as such.<\/p>\n

August 2020: the beginning of hostilities<\/h2>\n

On August 30, 2020, Engie voiced its will to sell its 29,9% stake in Suez. This divesture aims at refocusing the group\u2019s activities on renewable energies. Following this announcement, Veolia made a \u20ac2.9bn offer directly to Engie, for its stake in Suez. In the wake of this first offer, both boards of Engie and Suez rejected the bid: Suez feared that the acquisition would have serious consequences on the group\u2019s employment, while Engie considered the offer price too low and put the increase of the offer price as a sine qua non condition<\/i> to the completion of the deal.<\/p>\n

This first offer is considered as a hostile bid as Veolia was willing to accomplish the acquisition with cash and by going directly to Engie, one of Suez\u2019s shareholders, rather than by going to Suez\u2019s board or executives. In other words, the transaction would have taken place without the approval of the purchased company.<\/p>\n

September 2020: Engie accepts Veolia\u2019s offer<\/h2>\n

Despite Suez\u2019s counterattacks, Veolia continued and came back with a second offer at \u20ac3.4bn, higher than the first one, in order to convince Engie to give up its shares.<\/p>\n

Engie\u2019s board showed support for this second bid and later accepted the offer, highlighting the effort on the price, the strategic rationale and the social plan. Veolia, whose intention is to acquire the remaining 70% of Suez in the future, has also committed not to launch a full takeover bid without the agreement of Suez\u2019s Board \u2014 thus proceeding with a friendly instead of hostile takeover.<\/p>\n

Indeed, it is not uncommon for an acquirer willing to acquire 100% of the shares of a company to acquire a smaller block of shares in the first place and proceed later with the acquisition of the remaining block. Furthermore, in France, any shareholder who reaches or exceeds 30% of a listed French company will have to launch a takeover bid for the entire capital. In other words, Veolia, after having acquired 29,9% of Suez, would have had to propose a purchase offer to all shareholders, as a 30% stake triggers an automatic takeover bid.<\/p>\n

February: Veolia launches a hostile takeover bid on 100% of Suez<\/h2>\n

Since Veolia\u2019s second bid, Suez and Veolia haven\u2019t been able to bridge divisions, and Suez continued to strongly reject the unfriendly acquisition. The counterproposition made by Suez to have an Ardian-GIP consortium taking over Suez’s French and international “Water and Technology” activities has been rejected by Veolia. On February 7, 2021, Veolia broke its commitment and filed a third public takeover bid but this time on 100% of Suez shares, at the same price as the second offer made exclusively to Engie. This acquisition would make Veolia the world leader in water and waste treatment. Once again, the offer was made without Suez\u2019s approval, reinforcing the hostile dimension of the deal.<\/p>\n

Have the negotiations reached a dead-end?<\/h2>\n

Bruno Le Maire, French Minister of Economy, denounced Veolia’s “unfriendly” bid and announced that he would refer the matter to the Autorit\u00e9 des March\u00e9s Financiers (AMF) in order to verify the conformity of the group’s announcements with its previous commitments.<\/p>\n

The situation seems to have reached a dead-end. On one side, Veolia has been ordered by the Tribunal de Commerce of Nanterre to suspend its takeover bid and to wait for validation of its offer by the Suez board of directors. On the other hand, Suez takeover defense strategy (which consists in the domiciliation of its Eau de France activity (targeted by Veolia) in a Dutch company for 4 years in order to make it inaccessible to a hostile bid) has just been rejected by the AMF on April 2, 2021.
\nWill Veolia and Suez be able to overcome their disagreements? Time will tell\u2026<\/p>\n

Key concepts<\/h2>\n

I present below key concepts to understand the Veolia-Suez saga.<\/p>\n

Defense strategy<\/h3>\n

In response to hostile takeovers, targets can devise defense strategies in order to prevent the takeover from going across the finish line. Well-known defense strategies are:<\/p>\n