Veolia volatility where there should be none!
Updated
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
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
Note
Should have said that at time of writing the share price was about 21.5, at time of this comment it has already spike halfway to my target, looking forward to another idea reaching target...Note
Veolia increased their offer for Suez to 21.5 per share and it was accepted today in principle with a definitive agreement by May 14th to be signed off. There will then have to be oversight from Europe anti-competition authority but as part of the deal a larger part of the French Suez business will be kept as a separate company. In the long term it is a good deal for Veolia who will now have a turnover of 37 billion making them a real global giant, however in the short term they have paid over a billion more for the company then they were anticipating so I expect some stringent cost savings on the way in the synchornicity of the companies. Price at time of writing is 24.4 - 24.5 and 8% gain after the news, we'll see if the market corrects it back a bit in the coming days or if it will hit my initial target of 25 euro.
Trade closed: target reached
25 euro target reached, I think Veolia is a pretty safe bet from here for some long term investment, I anticipate +10% gains every year, GLTANote
Veolia has now bought Suez and share price hovering around 32, another push oncoming with steady gains as the cost savings from integration come through over the next couple of years, turns Veolia into a proper global companyNote
Contracts announced early this year include:- 22 year contract for forestry management and biomass supply to a steam plant in Brazil for Braskem. 2 years of construction and 20 years management and supply of close to a million tons of steam at 23 bar every year.
- Veolia to supply L'Oréal with high grade recycled plastics for packaging. L'Oreal have commited to being 100% recycled plastics by 2030
- In France, Nice Côte d’Azur recently selected Veolia to modernize its household waste energy recovery plant. Their ambition is to make it Europe’s most modern and most environmentally friendly energy recovery center.
This 20-year contract includes the renovation and transformation of the waste-to-energy plant, and construction of a next-generation waste sorting center for selective collection, plus a waste baling facility.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.