UPDATE 1-Veolia and Suez say not working on merger

Sat Oct 20, 2012 3:38pm EDT

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PARIS Oct 20 (Reuters) - Veolia Environnement <Vie. pa> and Suez Environnement said on Saturday they were not working on a merger after Le Monde newspaper reported the two companies had held talks that fell apart over antitrust concerns.

"Suez Environnement denies that it is working on a business combination with Veolia Environnement," Suez said in a statement.

Veolia said in a separate statement: "A merger with Suez Environnement is not on the agenda."

Le Monde said the two French companies, which specialise in providing waste, water and environmental services to municipalities and corporate clients, negotiated about a possible merger during several meetings in September after Suez's CEO made an initial approach.

The proposed deal was later abandoned because the groups' combined market share in France would be too large, and significant divesting would be needed to obtain regulatory clearance, the newspaper said, without citing sources.

That the two competitors were considering a tie-up is a sign of how the global economic slowdown has hit the waste and environmental services sector.

Both Veolia and Suez have seen lower sales because global volumes of industrial waste have declined in recent quarters.

Suez's finance chief told Reuters in a recent interview that processed waste volumes - a measure of industrial production which has a significant impact on the company's results - would fall around 3 percent in 2012, as expected, with the decline to continue "at least" into the first half of 2013.

Veolia has also been cutting costs and selling assets this year to cope with lower demand and reduce its debt.

Suez shares closed at 8.43 euros on Friday, valuing the company at 4.33 billion euros. Veolia shares closed at 8.51 euro for a market capitalisation of 4.54 billion euros. (Reporting by Leila Abboud; Editing by Ralph Gowling)

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