LONDON (ICIS)--Veolia and Suez have reached an agreement in principle on a proposed merger that would create the world’s largest waste management and recycling group by revenue, with €37bn/year in sales, the two firms said on Tuesday.
Each company is individually a global recycling and waste management major; Veolia sales stood at €26bn in 2020, while Suez generated global revenues of €17.2bn.
Both firms are headquartered in Paris.
Veolia has been pursuing a merger between the two companies since it made an unsolicited offer to acquire Engie’s 29.9% stake in Suez on 30 August 2020.
The negotiations have at times been acrimonious and have involved multiple legal manoeuvres from Suez, which attempted to block the takeover.
“We have been calling for a negotiated solution for many weeks and today we have reached an agreement in principle that recognises the value of Suez," said Philippe Varin, the firm's chairman.
"We will be vigilant to ensure that the conditions are met to reach a final agreement that will put an end to the conflict between our two companies and offer development prospects."
A share price of €20.50 (with coupon) has been agreed. The agreement would result in the divestment of around €7.0bn of assets, which would form a new company called Suez.
It would be owned by a group of shareholders, including financial partners from both groups, and by employees.
The divested assets will include Suez’s municipal water and solid waste activities in France - including research centre CIRSEE. They will also include Suez’ activities in Italy (including its Acea stake), the Czech Republic, Africa (including Lydec), Central Asia, India, China, and Australia.
Veolia will hold the remaining assets, if the agreement goes ahead.
The deal also provides for the termination of Suez’ agreement to acquire Cleanaway’s Australia recycling and recovery activities, which had been made subject to the results of the merger negotiations between Suez and Veolia.
The Dutch foundation, to which Suez transferred two ordinary shares of its main French water activities, which had been done in the wake of the unsolicited offer from Veolia in September 2020, will be deactivated.
At the time of it’s initial unsolicited offer, Veolia had recognised that antitrust authorities may demand divestments around its water activities so the resulting company does not have a dominant position in the market.
Front page picture: Veolia's headquarters
Source: Vincent Isore/via ZUMA Press/Shutterstock
(recasts, adding detail of divested assets in 10th paragraph)