Veolia Environnement SA, the world’s biggest water utility, jumped the most in more than three years in Paris after saying it’s in exclusive talks to sell the Transdev mass-transit unit.
Veolia rose 15 percent, the most since October 2008, to close at 10.55 euros. The utility, the biggest gainer on the benchmark CAC 40 index, had lost about half its market value since a July warning that it would miss a financial target and take writedowns.
Chief Executive Officer Antoine Frerot “appeared confident and determined” and the outlook provided in December was maintained, Veronique Colas, analyst at AlphaValue, said by e-mail. Last week, she had called for the utility’s board to resign to improve governance.
Frerot is seeking to revive the utility amid reports that his predecessor Henri Proglio, who remains a director, was trying to garner board support for a replacement. Frerot’s revamp would undo a legacy of expansion under Proglio that took the utility to 77 countries from Argentina to South Korea.
Frerot “should and will survive what has been a very clumsy attempt to destabilize his authority, given that the path he has proposed to restructure Veolia has been accepted by the market,” Verity Mitchell, utilities analyst at HSBC Plc, said by e-mail.
Peppered With Questions
The CEO was peppered with questions about his future at a press conference today in Paris. He ducked the ones about his relationship with Proglio, saying the “past is the past” and that a board meeting yesterday had approved by a “large majority” the restructuring plan and his leadership.
“What I care about is what are we going to do with this company, where are we going to take it and what is the future,” Frerot said, adding that during the “episode” he spent his energy convincing employees of the need to push through changes and reassuring “sometimes worried” customers.
In addition to plans for 5 billion euros ($6.7 billion) in asset sales this year and next, Frerot pledged 450 million euros of cost-cutting until 2015 and streamlining the way the utility is managed because the current structure is “heavy and costly.”
“Veolia is today insufficiently armed” for changes that have occurred in the market, he said, promising a “new Veolia” would emerge.
The utility achieved 1.54 billion euros of divestments last year, taking the total to 4.08 billion euros during the past three years, according to the company’s statement today. This was “significantly” more than a target of 3 billion euros between 2009 and 2011, it said.
Veolia is in exclusive talks with an unidentified investor for the sale of Transdev, the mass-transit unit it owns with Caisse des Depots et Consignations, Frerot said today. “We are optimistic for completion relatively quickly” by the end of 2012, he said.
Veolia may not sell all its stake to the investor right away and could retain a “very minor” holding that would eventually be sold, he said. The utility’s goal is to exit from the transport business “completely.”
Veolia Transdev was created after Veolia and French state-owned bank Caisse des Depots et Consignations agreed to merge their transport units in 2010. The holders had planned for an initial public offering of the business that Chief Financial Officer Pierre-Francois Riolacci said in May 2010 had an equity value of 1.4 billion euros.
Veolia has also initiated the process of selling solid waste activities in the U.S. and U.K. regulated water businesses, according to the statement. “We have received substantial interest” in the assets, Frerot said.
Veolia will narrow its geographic reach to about 40 countries in a bid to lower debt to less than 12 billion euros by the end of 2013, the company said. Net financial debt was 14.73 billion euros at Dec. 31, down from 15.22 billion euros a year earlier.
Veolia had a net loss of 490 million euros compared with a restated profit of 559 million euros a year earlier, the Paris-based company said today in a statement. That was greater than the average estimate of a 281 million-euro loss of seven analysts surveyed by Bloomberg. Frerot declined to provide an earnings outlook for 2012 because of the plans for asset sales.
This year “will be the first for the transformation of Veolia after a year of transition,” Frerot said today.