Veolia volatility where there should be none!So, what should be quite a boring steady company has become embroiled in a bitter battle with a rival company.
Veolia (12.5B market cap) are trying to buy Suez (10.4B), one of their main competitors.
This started by Veolia talking to Suez but from the get go Suez were not interested.
Let's consider this, Suez Canal opened in 1869, Suez the company has it's origins from that. You can imagine a french company with that much history is not really going to roll over and give up their name too easy.
There is a lot of overlapping areas between the two companies, you can see how the word synergy would be applied perfectly in this situation.
Veolia has bought just under 30% of Suex from Engie which was in turn owned in part by the French government (that also caused controversy), sale is now complete and Veolia have attempted to parlay with Suez with no great success.
At the moment Suez is trying to put together a better offer to the board and shareholders but it seems unlikely that they will be able to do that.
So where will the share price go?
After the offer there was a brief rise but generally the shares of the purchasing company drop in a situation like that and the shares of the company being purchased rise, this is usually a short term situation as was the case here, Veolia was fantastic value when it hit the low here of 16 with a quick recovery always assured. Full disclosure my BEP is around 14.
So more than likely Veolia will prevail, they are one fo the biggest players in water treatment and waste in Europe/World and this would cement that position on the world stage. Initially there may be another dip in the next year but despite the difficulties that are coming down the road and the amount of debt Veolia will have to take on to purchase Suez it's hard to see anything but positive over the longer 3 - 5 year term.
Veolia are quite an innovative company, they have green credentials that are genuine and will be a force in the future.
My initial target would be 25 euro/20% increase short term, in 3 to 5 years when the dust has settled and cost savings/synergy has borne fruit I think you are easliy looking at 100%
Today Veolia issued a negative interest 6-year bond for 700m which was over-subscribed, this gives some indication of the investor interest and profile of Veolia
