Veolia management responded for the first time to the largest merge and acquisition in the global environmental sector

Source: China Environment News, July 13,2021

Veolia officially responded to the media for the first time recently. After more than a year, Veolia, the world’s largest environmental company, has finally made clear progress in acquiring Suez, the world’s second-largest environmental company. The merger is expected to be completed at the end of this year or early next year. 

The reporter recently interviewed Christophe MAQUET, Senior Executive Vice President of Veolia, Chairman of Veolia Asia. Christophe MAQUET introduced that this is the largest transaction in the global environmental sector so far. The turnover of Veolia is 27 billion euros, in addition to the 10 billion euros from Suez, the Veolia group will have a revenue of 37 billion euros. 

The largest acquisition in the global environmental sector

It is learnt that the merger agreement signed on May 14, 2021 between Veolia and SUEZ provided for the long-term investors to submit a binding promise to purchase the new SUEZ. This has been done since June 29: the consortium of investors with a French majority, consisting of Meridiam, GIP and CDC/CNP Assurances, has submitted its binding final offer to Veolia and SUEZ to purchase the new SUEZ for an enterprise value of €10.4 billion. This valuation includes a potential earn-out of €300 million to be paid at the end of the 2021 fiscal year2. All of the consortium's commitments to maintain all jobs and social benefits have been formally confirmed, as well as those relating to the duration of the holding. 

This offer, approved by the Boards of Directors of SUEZ and Veolia on June 29, 2021, enabled Veolia to raise the price of its tender offer for the SUEZ shares not yet held by Veolia to €20.5 per share, coupon attached. 

Veolia will retain nearly €10 billion of SUEZ's revenues, including all of the assets designated since last fall as "strategic" for its plan to create a global champion of ecological transformation, in particular its activities in the United Kingdom, Spain, the United States, Latin America, Australia and SUEZ's Water Technologies Services business. 

During the online interview, Christophe MAQUET gave a detailed introduction to the acquisition. He said that in fact the size of the transaction is not the key point, it is the combined strengths of Suez and Veolia which would turn the tide of the ecological emergency and make it  possible to: provide solutions to environmental problems which  are yet to appear, because it makes it possible to  invest more, to innovate better, and to invent more; combine our talents, not merely adding our  intelligence together, but multiplying it to find novel and more effective solutions; influence the debate about regulations, particularly  about the price of carbon emission trading.


Suez will be divided into two parts after the acquisition 

The ecological transformation is Veolia’s new strategy.

During the interview, Christophe MAQUET sorted out the key time points of the merger and acquisition to the reporter. Our goal is to build a group that is formidably positioned to make a lasting mark in the highly promising sector of ecological transformation. A unique opportunity arose with ENGIE's willingness to sell its shares in SUEZ in July 2020 and by October 5 at the same year, Engie sold its 29% stake in Suez to Veolia. In April 2021, Veolia and Suez reached an agreement allowing the merger of the two companies. Suez will be divided into two parts: Veolia will retain nearly €10 billion of SUEZ's revenues, the new SUEZ thus formed would have revenues of nearly €7 billion. 

This agreement was reflected in the memorandum signed on May 14 and was also confirmed at the Suez shareholders meeting on June 30, showing that it is a binding offer. 

The reporter noted that all of Suez’s water treatment business in mainland China, whether it is municipal or industrial water projects, are not within the scope of this merger. Christophe MAQUET explained that Veolia’s original merger plan was based on regulatory and anti-monopoly requirements, hoping to retain only Suez’s water business in France. However, the merger process was not smooth. Veolia also made a lot of compromises during the process. For example, on the basis of the original plan to retain Suez’s water business in France, it also left New Suez with its business in Africa and India, and water business in China. 

    As the chairman of Veolia Asia, Christophe MAQUET said, “We originally hoped to obtain all of its business in Asia to form a synergy group, but in fact this is the result of negotiations with the Suez management.” 

After the merger, Suez will be divided into two parts, Veolia will retain nearly €10 billion of SUEZ's revenues, and the new SUEZ thus formed would have revenues of nearly €7 billion, including SUEZ's Water and Recycling & Recovery activities in France, international assets in Italy, Central Europe, Africa (including Morocco), Central Asia, India, China and Australia, as well as global digital and environmental activities, enabling it to maintain its growth prospects and innovation capacities in France and internationally. 


To better support China’s development of green economy 

In the past 30 years, Veolia has paid close attention to China’s policies in the fields of climate change and green low-carbon circular economy. China is now moving from treatment and environmental protection to a green, circular and low carbon development. We are very happy that Suez is joining Veolia, so that we can combine our strength and talents to support the Chinese government and clients in China in pursuing green growth. Thanks to the addition of Suez's expertise and talents, Veolia will be able to accelerate development of the green economy in China and support the Chinese Government in pursuing green growth. At the same time, this merger can better promote Veolia to achieve its strategy of Impact 2023. 

Christophe MAQUET expressed that, China is a very important market to Veolia, not only for the market size, the most important is the speed of market development. In the past 5 years, Veolia’s revenu has doubled due to Veolia’s continuous cooperation with Chinese industrial and municipal partners in ecological transformation. The future strategy is to continue this rapid development. And he believes that China’s huge market can better stimulate Veolia’s innovative capabilities, and that can help Veolia pass on some good practices in China to Veolia’s other parts of the world. Of course, this is a two-way process, and good practices of Veolia in other countries will also be used in China. 

Christophe MAQUET expressed his admiration for China to achieve its goal of reaching carbon neutrality from 2030 to 2060. For reference, carbon emissions in France peaked in 1991 and the government pledged neutrality in 2050. There are 59 years in between, almost double the years of China. America reached carbon emissions peak around 2007 and it pledged neutrality also in 2050, meaning there are 43 years in between. To achieve carbon neutrality, China needs coordinated and very strong efforts. 

    He said that “ It is an opportunity for Veolia and we have a lot of solutions in this regard. Energy, industry especially heavy industry, transportation and buildings are key sectors of carbon emissions which should transform towards a green, low-carbon and circular economy model. Environmental services companies such as Veolia can play a critical role in the ecological transformation. In the past, environmental services typically focused on environmental compliance. But the commitment to lower carbon emissions will enable environmental services to move up the production chain, provide solutions that will transform the ecology and extend to cover more fields related to combating climate change, including but not limited to energy efficiency promotion for industry and buildings, renewable energy (biomass, waste to energy), biofuels production, waste heat recovery, material recycling such as EV batteries and plastic recycling, CO2 capture, etc. ” 

Environmental businesses like Veolia are able to help industrial carbon emitters to reduce emissions, and avoid carbon emissions by optimizing their own operations. For example, in China, by 2020, Veolia’s energy business line reduces nearly 190,000 tons of carbon emissions, while the waste business line avoids 400,000 tons of emissions. We recover energy from sludge at several wastewater plants in Haikou and Urumqi. In Kedong County, Heilongjiang Province, we use biomass to provide heat for local users in winters. In Zhejiang Province, we manage one of the largest rPET plants in China. In Beijing, we oversee the full water cycle in Yanshan Sinopec and reduce fresh water consumption.

Veolia also operates a CCUS project in India in which we sell carbon products to the local market. As the market began to emerge, we are very concerned how carbon products can be valuable for users, especially for industrial users. Total Energies and Veolia have joined forces to accelerate the development of microalgae cultivation using CO2 with the long-term goal of producing next-generation biofuel. 

Veolia, with a history of 170 years, has entered China for more than 30 years. Although its water business has attracted much attention in China, Veolia designs and provides game-changing solutions that are both useful and practical for water, waste and energy management. Through its three complementary business activities, Veolia helps to develop access to resources, preserve available resources, and replenish them. This is also Veolia’s value of “resourcing the world”. 

Now, Veolia hopes to become “the benchmark company of ecological transformation” through this sensational global merger. 

What kind of company is Veolia? From “resourcing the world” to ecological transformation, it is obvious that Veolia is no longer a pure environmental company. It seems more accurate to an environmental based company. Since its establishment in 1853, Veolia has continued to explore new businesses and enter new fields in the direction of green and low carbon. For example, in Asia, the biotransformation technology cultivates insects from food waste, then extracts nutrients from the insects, to make protein agents, which let it develop towards food and agriculture. 

A Veolia management in China added that Veolia has gradually transformed into a resource integration manager, with energy reuse, resource conversion, circular economy, and waste conversion into new materials. Now it has extended to ecological transformation, mainly in terms of carbon. The development of new energy is to use the technology in the operation process to reduce carbon, then reuse the carbon at the end of the process. These are all new businesses of Veolia, including the direct carbon recovery business.


Source: China Environment News, July 13,2021