Veolia and Suez move to quash merger rumours
The French parent companies of Veolia and SITA, two of the UK's biggest waste contractors, have denied merger talks following intense market speculation about the possibility of a deal.
According to a report in the Financial Times (FT) yesterday, both Suez Environnement and Veolia Environnement Services were forced to put out statements on Saturday night denying they were considering a potential merger.
However sources close to both companies claim that preliminary talks had taken place, prompted by Suez, but had not reached board level.
A statement issued by Suez said: “We deny the market rumours that we are working on a rapprochement with Veolia.” Meanwhile, Veolia said a deal with Suez was not the “order of the day”.
Industry observers believe that such a deal would face too many hurdles over relative valuations and competition concerns.
While Veolia is far bigger than Suez, with €30bn of sales in 2011 compared to €15bn, its shares have suffered badly because of heavy writedowns and it also carries €15bn of net debt making its market value of €4.4bn barely bigger than the €4.3bn of its smaller rival.
If the two companies were to merge, the combined organisation would end up controlling almost two-thirds of France’s municipal water supply, and many believe this would not get past the country’s competition laws.
However, according to the FT, one person with knowledge of the talks said either the French water business of Veolia or Suez could have been sold, possibly to another French company such as Vinci, to address these fears.
It is understood that the talks had the tacit backing of GDF, the French utility that owns 35.7% of Suez.