Veolia’s fresh salvo against Cleanaway-Suez Aus assets deal amid French regulator AMF’s warning

French waste management giant Veolia has fired a fresh salvo against ASX-listed Cleanaway’s move to buy its takeover target Suez’s Australian assets, after new regulatory warnings.

Cleanaway’s caught up in a global tussle for rubbish control between waste giant Veolia and its takeover target Suez. Picture: Che Chorley

French giant Veolia says Australia’s largest waste manager Cleanaway should “carefully consider” any deal to buy its takeover target and smaller rival Suez’s local assets, following a fresh regulatory warning about potential breaches.

Last week, Suez confirmed it is in advanced complex discussions with Cleanaway to sell its $2.5bn worth of Australian assets after being approached in 2020.

It’s the first test for Cleanaway’s interim management, led by chairman Mark Chellew, former boss of Adbri Limited, after the controversial exit of former chief executive Vik Bansal, who initiated the deal.

A day later, France’s financial markets regulator, Autorité des Marchés Financiers (AMF), publicly expressed concerns about Suez’s defensive tactics to thwart a takeover by Veolia, its 29.9 per cent shareholder.

Cleanaway chairman Mark Chellew. Picture: Sam Mooy

The regulator’s main concerns centre around Suez’s March 21 proposal for Veolia to pay 20 euros ($31) per share – two euros more than it has offered – while selling more than half of its assets to private equity business Ardian SAS and New York-based infrastructure investment group, Global Infrastructure Partners.

Separately, Suez has restructured some shares in its water business to a Dutch foundation, which could create antitrust complications for Veolia.

In a public statement on Good Friday, issued in French, Paris-based AMF said some of the structural changes of the foundation and the proposal of the Ardian-GIP consortium, negotiated and supported by the Suez board of directors, “undermines the rules and guidelines applicable to public offers”.

Cleanaway’s former chief executive Vik Bansal. Source: Waste Management Review

“The search for a negotiated solution between the parties is quite legitimate but it must respect the principles of transparency and market integrity, loyalty in transactions and competition, as well as the free play of bids and their outbidding,” according to a translation of the document by the AMF, which did not impose any sanctions on Suez.

Veolia, which has initiated court actions in France and Australia against Suez’s bid to sell its assets, said AMF made the statement “to inform the markets of the unlawfulness of Suez’s global scheme established to prevent Veolia’s proposed takeover”.

“It is extremely rare that the AMF engages in this type of communication,” Veolia’s chief operating officer Estelle Brachlianoff said.

“The French securities watchdog does so in the event of a significant spillover in the framework of a takeover bid.

“It is a clear message of the unusual nature of the ill-considered actions taken by Suez.”

Veolia said it was its view that the sale to Cleanaway during a public bid period of a clearly identified strategic asset “does not comply with French law”.

“Judicial review of Suez’s corporate interest will take place to determine the urgency and necessity of such a disposal, which has clearly become a tactical, malevolent manoeuvre to frustrate Veolia’s public bid,” Veolia said in a statement.

“Cleanaway should therefore carefully consider whether its proposed entry into any transaction to acquire Suez’s Australian assets with full knowledge of the facts and the stated position of the AMF would amount to complicity in the implementation of such an irregular Global Scheme.”

Analysts at Macquarie last month said Cleanaway may pay up to $3bn for the Suez Australia business and raise as much as $2bn worth of equity for the acquisition.

Veolia’s Australian managing director and chief executive Richard Kirkman said the proposed divestment “breaches Suez’s corporate interests”.

“Veolia will seek the nullity of any such transaction before French and Australian courts. Veolia will ensure the protection of Suez’s shareholders’ interests,” Mr Kirkman said.

Cleanaway, which has a market capitalisation of $4.5bn, has previously said it is acting lawfully.

Separately, the Australian Competition and Consumer Commission, which is reviewing the local impact of the Veolia-Suez takeover, has said it would under a public evaluation of any deal between Cleanaway and Suez.