European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Suez - Veolia Tussle: Ardian and GIP Enter the Fray

Veolia - Suez Recap. Veolia Wins the First Round, but Suez's Unions Delay the Operation.

Suez: An Opportunistic or Fair Bid by Veolia?

Event-Driven

On 7 January, <a href="https://www.smartkarma.com/entities/veolia-environnement-sa" target="_blank" data-smartkarma-citation="entities:21568:1" rel="noopener">Veolia Environnement SA (VIE FP)</a>  increased its bear-hug on <a href="https://www.smartkarma.com/entities/suez-sa" target="_blank" data-smartkarma-citation="entities:21546:1" rel="noopener">Suez (SEV FP)</a> by sending an open letter to the Board of Suez on 7 January and appealing to shareholders at the same time.
The offer, which is not formal, values ​​Suez at €11.3 bn, but Suez still considers it hostile and is trying to put pressure, while the French government continues to quietly mediate for an agreement.
Veolia intends to file a voluntary offer at €18 per share - the same price at which it acquired a 29.9% stake from Engie-, which values ​​100% of Suez at c. €11,252 mn, an implied EV of c. €22,180 mn.
<ul>
<li>The price tag for the remaining stake is €7,887.5 mn.</li>
<li>This represents a 13.2% premium to the VWAP over the 3 months prior to 7 January, and a c. 8.4% premium to the prior trading session.</li>
<li>3.4x EV/Fwd Revenue, 19.9x EV/Fwd EBITDA and 33.1x P/Fwd EPS (source: Capital IQ consensus).</li>
<li>The purchase price will be reduced by any distribution or adjusted to take to account of any capital transaction.</li>
</ul>
The core of the dispute remains unresolved, and to top it off, there is not yet any agreement between the parties involved as to when that will happen.
Regarding the transfer of the French water assets of Suez to a Dutch foundation, Veolia now has to reverse that move. Veolia could exercise its voting power at the next Suez's AGM (likely next summer) and replace the Board of Suez. 
Independently of what happens, Veolia will remain a majority shareholder unless it can be bought out at a price higher than €18 per share. The future does not look pretty for Suez's Board. Both parties should reach an agreement before the AGM.
Recommendation is LONG Suez, TP €18.
<ul>
<li>Suez is trading at a gross spread to the offer of c. 7.7%, which seems adequate given the hostile situation, the time deals in the sector take to complete (all relevant authorisations could take between 12 to 18 months, according to Veolia).</li>
<li>The share price of Suez is slowly but steadily approaching €18.</li>
</ul>

On 7 January, Veolia Environnement SA (VIE FP)  increased its bear-hug on Suez (SEV FP) by sending an open letter to the Board of Suez on 7 January and appealing to shareholders at the same time.
The offer, which is not formal, values ​​Suez at €11.3 bn, but Suez still considers it hostile and is trying to put pressure, while the French government continues to quietly mediate for an agreement.
Veolia intends to file a voluntary offer at €18 per share - the same price at which it acquired a 29.9% stake from Engie-, which values ​​100% of Suez at c. €11,252 mn, an implied EV of c. €22,180 mn.

The price tag for the remaining stake is €7,887.5 mn.
This represents a 13.2% premium to the VWAP over the 3 months prior to 7 January, and a c. 8.4% premium to the prior trading session.
3.4x EV/Fwd Revenue, 19.9x EV/Fwd EBITDA and 33.1x P/Fwd EPS (source: Capital IQ consensus).
The purchase price will be reduced by any distribution or adjusted to take to account of any capital transaction.

The core of the dispute remains unresolved, and to top it off, there is not yet any agreement between the parties involved as to when that will happen.
Regarding the transfer of the French water assets of Suez to a Dutch foundation, Veolia now has to reverse that move. Veolia could exercise its voting power at the next Suez's AGM (likely next summer) and replace the Board of Suez. 
Independently of what happens, Veolia will remain a majority shareholder unless it can be bought out at a price higher than €18 per share. The future does not look pretty for Suez's Board. Both parties should reach an agreement before the AGM.
Recommendation is LONG Suez, TP €18.

Suez is trading at a gross spread to the offer of c. 7.7%, which seems adequate given the hostile situation, the time deals in the sector take to complete (all relevant authorisations could take between 12 to 18 months, according to Veolia).
The share price of Suez is slowly but steadily approaching €18.


Suez

Veolia Steps up Pressure on Suez