UPDATE 1-Veolia top 3 shareholders abstained in CEO re-election vote

Thu Mar 13, 2014 1:17pm EDT

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(Adds CDC comment, background, details)

By Matthieu Protard and Benjamin Mallet

PARIS, March 13 (Reuters) - Veolia board members representing its top three shareholders and more than 20 percent of its stock abstained from the vote to re-elect Chief Executive Antoine Frerot in February, officials from two of the three told Reuters on Thursday.

Representatives of the government's CDC holding fund, with 8.85 percent, the Dassault family holding company with 5.99 percent, and institutional investor Groupama with 5.20 percent all decided not to back Frerot in the Feb. 25 vote of the 16-member board which returned him to power, said Henri Emmanuelli, chairman of the CDC's supervisory council.

Frerot himself has characterised the events that led up to his re-election as an attempted boardroom coup, naming Dassault as one of the rebels.

Thursday's direct confirmation of the rebellion from Emmanuelli and Groupe Dassault CEO Charles Edelstenne confirms the scale of opposition he faces and the fact that the government body was among the rebels.

"To my knowledge neither the CDC nor the two other main shareholders, Groupama and Groupe Dassault, took part in the reinstatement of Mr. Frerot," said Emmanuelli.

Earlier on Thursday, Edelstenne went further, confirming Dassault's initial support for a different candidate.

Edelstenne did not give a name, but his comments come after news of an attempt to put senior government official David Azema in Frerot's place kicked off the saga a month ago in a newspaper report.

Groupama had no immediate comment.

Azema backed away from being a formal candidate in an interview with Reuters on Feb. 25. Frerot was subsequently re-elected the same day.

Frerot himself confirmed the shareholder rebellion in a March 3 television interview in which he named Dassault as one of the rebels.

Sources familiar with the world's biggest environmental services group have said some shareholders are unhappy with the pace of restructuring at Veolia, whose stock is down some 40 percent since Dassault bought its stake in 2008.

The failed coup comes about two years after a similar challenge led by state-controlled utility EDF, which at the time had a 4 percent Veolia stake and whose CEO, Henri Proglio, is the former head of Veolia and one-time mentor of Frerot.

A source in the Frerot camp told Reuters last month that the leadership challenge partly reflected a desire for more drastic staff cuts to restore profitability and boost the stock price.

Veolia is set to cut a total of 1,600 jobs in its French water business, of which 900 would occur through natural attrition - 500 in 2013 and 400 this year - and 700 through redundancies. It will also reassign 500 outsourced jobs to internal staff.

These cuts have been agreed with the unions and Frerot has said that to cut more jobs would be counterproductive. Some other institutional shareholders have said they support Frerot's approach. (Additional reporting by Cyril Altmeyer; Writing by Andrew Callus; Editing by James Regan)

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