Suez Environnement, Europe’s second-biggest water utility, will buy the 24 percent stake in Barcelona water company Agbar that it doesn’t already own from La Caixa for stock and 299 million euros ($404 million) in cash.
Suez will issue 22 million new shares, about 4.1 percent of the company’s equity, to La Caixa. The Spanish lender will hold about 7 percent of the Paris-based utility after the deal, making La Caixa the second-largest shareholder, Suez said today in a statement. Suez’s shares rose the most in almost two months.
The deal shows Suez boosting its foothold in Spain’s second-biggest city where Sociedad General de Aguas de Barcelona, known as Agbar, supplies residents and businesses. Agbar holds 30 percent of Bristol Water Plc, which distributes water to the U.K. city and 1.2 million residents. It also has assets in Chile, Algeria and elsewhere in Latin America.
Suez took control of Spain’s largest, non-state water supplier in 2010, making that country its second-biggest water revenue source after France and tapping into a market that was growing faster than at home.
The transaction “cleans up the income statement by significantly lowering the minority interest line,” Matt Sheldon, a portfolio manager, environmental strategies, at Kleinwort Benson Investors in Dublin, said by e-mail. It “highlights that Suez is in growth mode,” and not cutting costs or de-leveraging.
“This transaction will allow us to simplify the shareholder structure of the group,” Chief Executive Officer Jean-Louis Chaussade said today on a conference call. “Suez will reinforce its presence in the promising markets of Spain and Chile.”
Suez has a “wish list” of possible targets for acquisitions and the financial flexibility to carry them out, Chief Financial Officer Jean-Marc Boursier said in February. The company and larger rival Veolia Environnement SA have suffered in recent years from falling demand for industrial-waste collection as factories in Europe reduced output during the region’s economic crisis.
Suez advanced 2.9 percent to 14.09 euros at the close in Paris, the most since April 16, valuing the company at 7.19 billion euros. The stock has climbed 37 percent in the past year.
In February, Suez, 35.7 percent-owned by energy producer GDF Suez SA, said the market “may have hit bottom” last year. Chaussade said today’s deal was expected to be completed by the end of September.