Highstar Capital Agrees to Buy Veolia Unit for $1.9 Billion

Highstar Capital, a U.S. infrastructure fund, agreed to buy Veolia Environnement SA (VIE)’s U.S. waste-management business for about $1.9 billion.

The transaction will cut Veolia’s net debt by $1.8 billion, the Paris-based world’s biggest water company said today in a statement. After the deal it will have completed 60 percent of its 5 billion euro ($6.1 billion) divestment plan, it said.

Highstar, the infrastructure-focused private equity firm once affiliated with American International Group Inc. (AIG), beat bids from buyout firm Madison Dearborn Partners LLC and Brazilian conglomerate Estre Ambiental SA, said people familiar with the matter prior to the announcement.

Veolia is shedding the unit as it tries to cut debt by 20 percent to 12 billion euros by the end of next year. Chief Executive Officer Antoine Frerot said last month he wants to focus on “promising” countries and will pursue asset sales in the U.S. and U.K.

“The transformation of Veolia is progressing as planned,” Frerot said in the statement.

Veolia shares rose as much as 4 percent to 9.58 euros in Paris. The shares traded at 9.50 euros at 9:04 a.m. local time.

Cost Cuts

Veolia plans to cut operating costs by 120 million euros in 2013 and narrow its geographic reach. On June 28, Veolia sold its U.K. regulated-water business to Infracapital Partners for 1.2 billion pounds ($1.9 billion).

The deal “will create a strong company with compelling growth prospects,” Highstar Capital Founder and Managing Partner Christopher Lee said in a separate statement. Highstar’s U.S. waste business will operate in 20 states with annual revenue of about $1.4 billion, it said.

Veolia ES Solid Waste Inc. has more than 300 locations that provide hazardous and non-hazardous waste management and industrial cleaning services, the company said on its website.

Highstar already operates U.S. waste management businesses Advanced Disposal Services Inc. and Interstate Waste Services Inc, according to the New York-based company’s website.

Deutsche Bank AG and Macquarie Group Ltd. advised Highstar on the deal.

To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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