Suez Environnement Protected From Hostile Bid, Mestrallet Says

Suez Environnement (SEV) is “sheltered” from a hostile takeover offer even though a shareholder pact will expire in less than two months, Chairman Gerard Mestrallet told investors today.

“The risks of a hostile bid in this sector are quite limited,” said Mestrallet, who also heads GDF Suez (GSZ) SA, which owns 34 percent of Suez Environnement. GDF Suez “intends to keep its shares.”

A five-year shareholder pact put in place for the creation of Suez Environnement in 2008 will run out July 1. Under the pact, a group of investors controlling about 12 percent of Suez Environnement had first refusal on holdings offered for sale. The group includes Areva SA, Caisse des Depots et Consignations, Belgian billionaire Albert Frere’s Groupe Bruxelles Lambert SA, Group CNP Assurances and Sofina.

The “pre-emptive rights” were designed to give the deal members “elements to strengthen their control of the company,” Mestrallet said at the time. Under the terms, if the major Suez shareholders wanted to sell their shares, GDF Suez had the right to buy them and if it refused, Suez Environnement would have been next in line to acquire them.

Public contracts for water and waste services often contain clauses under which they can be cancelled in the event of a change of control of a utility, Mestrallet said today.

“I think this makes the group sufficiently sheltered from a hostile operation,” he said. “The end of the shareholders’ pact won’t put the breaks on Suez Environnement growth.”

Suez Environnement, Europe’s second-biggest water company, reported last month first-quarter profit remained almost unchanged because of a “particularly difficult” economic environment.

The utility said waste-treatment revenue dropped 5.3 percent as the economic crisis in Europe continued to shrink volumes. The utility, together with larger rival Veolia Environnement SA (VIE), has seen demand for industrial waste collection slide after manufacturers reduced factory output.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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