UPDATE 1-Veolia closes in on Transdev transport merger

Wed Jul 22, 2009 5:44pm EDT

* Veolia, CDC enter talks on Transdev merger

* New company to be 50/50 owned between Veolia and CDC

* New transport group to have around 8 bln eur revenues

* Could float new transport company (Adds detail, background)

PARIS, July 22 (Reuters) - French utility group Veolia (VIE.PA) and state bank Caisse des Depots agreed to start talks about merging their transport businesses to create a new company with 8 billion euros ($11.35 billion) in proforma revenues.

The two groups said on Wednesday that the operation would take the form of a merger between Veolia Transport and Transdev, which is currently 70 percent owned by the Caisse des Depots.

Veolia and the CDC would each end up with 50 percent of the new transport company, which they said would be a "global leader in public passenger transport" and would have 130,000 employees.

Although both companies recently denied having sealed a deal on Transdev, speculation had been rife in the French media that a Transdev/Veolia Transport merger was imminent.

The companies said the merger still required final agreement as well as approval by regulators and the RATP, a French public transport body which owns 25.6 percent of Transdev.

They added that they planned to list the new transport company on the stock market, if market conditions were suitable for a flotation.

"This merger opens up outstanding growth prospects benefiting the personnel, clients and shareholders of Veolia," Veolia Chairman and Chief Executive Henri Proglio said in a statement.

Veolia shares closed down 0.75 percent at 22.53 euros on Wednesday, giving the company a market capitalisation of around 11.1 billion euros. ($1=.7046 Euro) (Reporting by James Mackenzie and Sudip Kar-Gupta; Editing by Gary Hill)

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