* Shares in Veolia, Suez close up 4.3 pct, 7.1 pct
* Companies say they are not studying an alliance
* Exane study says antitrust issues could be solved with IPO
(Adds further details on Exane report)
PARIS, April 16 French waste management and
water companies Veolia Environnement and Suez
Environnement both denied on Wednesday that they are
in talks about merging or even considering such a move.
Shares in Veolia closed 4.3 percent higher and Suez closed
7.1 percent higher following an Exane BNP Paribas research
report which said the "stars are aligned" for the French waste
and water companies to revisit the idea of merging. The trading
volume in Suez shares was the second highest in more than a
"There are no talks ongoing and there is no project for an
alliance. The speculation on the bourse is based on nothing," a
Veolia spokesman said.
A spokesman for Suez also denied alliance plans. "Two years
ago we held talks, which were broken off. Today, the project is
definitely not on the agenda," he said.
In a 40-page study, Exane said that much had changed in the
two years since the two firms briefly discussed a merger and
dropped the plan over antitrust concerns.
Antitrust issues affect only about 12 percent of combined
core earnings, are concentrated in France and could possibly be
solved with an IPO of Suez's stable water business, Exane said.
Exane said that the disposals that would be required in a
Veolia-Suez tie-up would be similar to those in the Holcim
- Lafarge talks in terms of accounting for
about 10-12 percent of core earnings.
Exane added it could also see French public financial
institution CDC swapping its minority stakes in Veolia and Suez
for a stake in Veolia France Water.
"We see up to 60 percent valuation upside from synergies in
a bull scenario, while leverage should be reduced sharply,
providing scope for further consolidation and/or improved
shareholder remuneration," the Exane analysts said.
They said a deal could appease key shareholders at Veolia
following a recent leadership challenge to Chief Executive
Exane also suggested that GDF Suez could swap part of its 35
percent Suez stake for Veolia's energy unit Dalkia
International, which it said could be a perfect exit ticket for
GDF and reinforce its energy services division Cofely.
Exane upgraded its rating on Suez shares to "outperform"
from "neutral" with a target price of 17.5 euros and its rating
on Veolia to "neutral" from "underperform" with a target price
of 15 euros.
(Reporting by Geert De Clercq; Editing by Anthony Barker, Greg