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Veolia Advances as Cost Cuts Ahead of Schedule: Paris Mover

Veolia Environnement SA rose the most since December in Paris trading after Chief Executive Officer Antoine Frerot said the biggest water company is ahead in a two-year plan to cut debt, costs and sell assets.

Shares climbed 3.2 percent to 8.88 euros after Frerot also said in an interview with BFM radio that a merger with rival Suez Environnement Co. “makes sense.”

Frerot has pledged to cut debt and scale back global operations to bolster profits. A potential merger with Suez Environnement, Europe’s second-biggest water company, would face antitrust issues in France, he said. No-one was available for comment at Suez Environnement.

Veolia was the second-biggest gainer on the benchmark CAC 40 index. In the first 2 1/2 hours of trading, about 2.9 million shares changed hands, compared with the average daily volume over the last three months of 3.9 million.

Both Suez Environnement and Veolia said in October that the two companies weren’t working on a merger. GDF Suez CEO Gerard Mestrallet said Dec. 11 that the company will keep its 34 percent stake in Suez Environnement even though an investor pact ensuring control of the water company won’t be renewed. The shareholders’ agreement is due to lapse in July.

Veolia’s market capitalization is 4.7 billion euros ($6.3 billion) and Suez Environnement’s is 4.5 billion euros, implying that a potential merger would create a company valued at more than $10 billion.

GDF Suez’s stake in Suez Environnement stems from a 2008 merger between Suez SA and state-controlled Gaz de France SA to create GDF Suez. During Mestrallet’s battle to push through that deal, he fought to keep a controlling stake in Suez Environnement backed by a five-year shareholder accord.

Under the pact, a group of investors controlling about 12 percent of Suez Environnement have 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.

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