The French saga continues
- From: Vol 4, Issue 10 (October 2003)
- Category: Market insight
- Region: Unspecified
- Country: France
- Related Companies: Apollo Management, Blackstone Group, Goldman Sachs, Nalco, Ondeo/Suez, US Filter and Veolia
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Veolia stunned Wall Street last month with news that the company is posting a $2.41 billion loss for the first half and that it is preparing to dispose of a big chunk of US Filter.
The announcement comes on the heels of Suez’s sale of its US-based Nalco. The about face suggests that both Veolia and Suez are retreating from the once prized US market.
Despite the major write down, markets responded favourably to Veolia’s announcement. Veolia’s share price jumped 7% on the day of the announcement and finished September up 14.1% at $22.49.
The market responded similarly to news early in September that Suez was cleaning up its finances by selling Nalco to a heavyweight buyout team consisting of The Blackstone Group, Goldman Sachs, and Apollo Management. Suez stock on the NYSE at one point for the month was up 6.9% but closed out September down 0.4%.
Ondeo-Nalco’s U.S. business was a strong point for Suez amid the broad spectrum of sour deals in the developing world that has driven the company deeply into debt. In fact, the sale of Ondeo- Nalco seems to indicate that Suez’s desperation runs deeper than the company has let on up to this point. Investors have shown enthusiasm for Suez’s attempt to restructure over the last few months as non-core businesses have been shed. However, that enthusiasm seems to be wearing thin and Suez’s restructuring may not be as well articulated as Veolia’s strategy.
Veolia has made clear to investors that it regrets purchasing US Filter and wants to shed most of the remaining company. In fact, Veolia has already taken major steps to slim down US Filter. The French company announced in 2002 that it was selling off $1 billion in non-core assets to bring its debt load under control. The majority of assets that ended up on the auction block were part of US Filter. In total, more than $1.1billion of US Filter has been sold off since it was purchased in 1999.