|Bid||11.11 x 0|
|Ask||11.34 x 0|
|Day's range||11.19 - 11.56|
|52-week range||8.63 - 94.14|
|Beta (5Y monthly)||N/A|
|PE ratio (TTM)||N/A|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
(Bloomberg Opinion) -- You can see why Antoine Frerot has had a bit of a swagger this week. The boss of Veolia Environnement SA looks like he’s in full control after launching a quasi-hostile, two-step takeover of French utility peer Suez SA. But he surely wants the deal badly, and his tactics are risky. He could be easier to rattle than appearances suggest.Veolia’s approach is aggressive and smart. The water and waste group is starting with a 2.9 billion-euro ($3.4 billion) offer for only 29.9% of Suez. This has been made exclusively to the main shareholder, energy provider Engie SA, which owns 32%. The move aims to keep Veolia below the threshold where regulators would force it to bid for the whole company. It also puts Engie on the spot. It provides a speedy cash exit from an investment that the 29 billion-euro power company suggested in July wasn’t core to its business.The only quibble could be on price. Engie Chairman Jean-Pierre Clamadieu says it’s too low.Perhaps Frerot is hoping Engie won’t ask for a lot more. After all, the Suez stake is a small part of its empire. A 10% bump in the offer price would be worth just 1% of Engie’s market capitalization. The French state is Engie’s lead shareholder and sounds happy with a Veolia-Suez marriage.Still, Engie shouldn’t let itself be taken for a ride.The Suez stake may have no strategic value for Engie, but it has plenty for Veolia because it’s a stepping stone to full control of its rival. Frerot will surely pay a full price if pushed.He could certainly justify offering more than the 15.50 euros-a-share he is dangling. True, the bid represents a thumping 50% premium over where Suez stock was trading just before Engie signaled it was open to offers. But that’s a pandemic benchmark after a dividend cut. Suez stock has clear recovery potential if economic activity picks up should Covid-19 abate. Yet the offer is below Suez’s late February share price.Consider too the synergies if Veolia achieved full ownership. It says cost cuts would deliver a 500 million-euro boost to profit on the Ebitda measure. The scope for revenue and capital expenditure benefits suggests more is possible. Say 600 million euros is realistic. Such gains can be valued at over 4 billion euros, using the companies’ average Ebitda trading multiple, and discounting for the four years until they fully materialize.Allocating just over half of this value creation to Suez shareholders is worth around 4 euros per share. If a fair Suez valuation is closer to February’s 15 euros per share than July’s roughly 10 euros, shareholders could demand a take-out in the high teens without being greedy.The difficulty for Engie — and potentially Suez — is that Suez shares are trading below Veolia’s offer, applying no pressure on Frerot to sweeten. But Engie can take its own view regardless of the market. Its Suez stake would make Frerot’s life a lot easier. Only when he gets that can he start smiling.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- A 19% one-day jump in a company’s stock price in the current pandemic-driven recession is the kind of thing you’d expect from the U.S. tech sector, not the staid world of European utilities.Still, that’s what France’s Suez SA, whose business is water treatment and waste management, delivered on Monday after rival Veolia Environnement SA offered more than 2.9 billion euros ($3.5 billion) for 29.9% of the firm.The stake, currently held by gas utility Engie SA, is just the appetizer. Veolia’s boss, Antoine Frerot, is proposing to eventually swallow all of Suez and build a “world champion” with 26 billion euros in combined sales in Europe and North America. Antitrust concerns over a combined market share of nearly 60% in France, which hobbled a previous attempt at a tie-up in 2012, would be soothed by preemptive asset sales.Veolia’s offer of 15.50 euros per share may look frothy at first glance. Suez swung to a loss in the first half of this year. It has underperformed listed peers over the past five years on a total-return basis. The price offered for Engie’s stake represents a 39% premium to Suez’s price a month ago. And after yesterday’s share surge, the company was valued at 78 times annual earnings, some way above its peer-group median of 15.9.Yet my Bloomberg News colleagues report those close to Engie are grumbling that Veolia has lowballed its bid. And they have a point.As painful as Covid-19 has been for Suez’s share price, dividend policy and cost of doing business — when the economy tanks, so does industrial demand for waste management — its underlying operations have started to look in better shape. The company expects a recovery in pretax earnings in the latter half of this year. Veolia’s Frerot seemed to acknowledge as much, boasting a tie-up would deliver a boost to profitability from the first year. And that’s with promised cost savings of only 500 million euros, a sum that represents an estimated 1.5% of combined operating costs, according to Barclays research. Relative to Suez’s depressed springtime share price, Frerot’s bid looks generous; relative to its February price of almost 16 euros, much less so. No wonder Veolia’s own shares rose 5.7% on Monday after announcing the proposal, despite a warning the bid would be funded by a capital increase.It looks in Engie’s interest to rattle Veolia’s cage and push for an extra sweetener. It has levers to pull: It could argue that a Veolia-backed tie-up is not the only way to create value from Suez, and other buyers may be interested in smaller chunks of the utility. It could wait for an activist investor to lobby for a better price, knowing Amber Capital has pushed for changes at Suez in the past.Suez and Engie have their own frustrated investors to consider when deciding how far to push Veolia. Adrien Dumas, a fund manager at Mandarine Gestion, warns this is a complex deal to engineer with risks on the regulatory and financing fronts. It’s by no means a done deal. Suez shares currently trade below Veolia’s offer price, suggesting an unwillingness on the part of some investors to risk holding out for more only to end up with less — or nothing. Suez itself is warning Veolia’s bid carries “great uncertainties.”For the time being, though, it’s in Frerot’s interests to try to keep things as amicable as possible — including price. Engie’s biggest shareholder is the French state, and Emmanuel Macron will want a good deal for the taxpayer. Nobody wants a Suez crisis, and Veolia should work to avoid one. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering the European Union and France. He worked previously at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Engie Sa (EPA:ENGI) share price has risen by 3.98% over the past month and it’s currently trading at 9.826. For investors considering whether to buy, hold...