July 19, 2012 / 2:12 AM / 5 years ago

Veolia sells U.S. waste unit to Highstar for $1.9 billion

PARIS/BANGALORE (Reuters) - Veolia Environnement (VIE.PA) is selling its U.S. waste management arm to infrastructure fund Highstar Capital for $1.9 billion, marking another step forward in the French company’s efforts to cut debt and shifting attention to the planned sale of its transport business.

The deal follows the sale last month of Veolia’s majority stake in its regulated UK water business, also for around $1.9 billion.

Analysts said the prices achieved in both sales were higher than expected.

Debt-laden Veolia is restructuring as Chief Executive Antoine Frerot unwinds much of an expansion plan undertaken by the company’s founder and former CEO Henri Proglio.

The company had debt of 14.7 billion euros at the end of last year and is aiming to sell assets worth 5 billion by the end of next year. The U.S. waste sale will cut net debt by $1.82 billion.

The deal also means 60 percent of the disposal program is now done, but the group’s attempts to exit its transport joint venture with French state bank Caisse des Depots (CDC), up for sale since December, could prove more tricky.

“The (waste and water) assets already sold showed a lot of appetite from the market, which doesn’t seem to be the case for Veolia Transdev, the other significant asset identified by the group in its disposal program,” CM-CIC Securities analyst Olivier Bails said in a note on Thursday.

A possible “positive surprise” could, however, come from a sale of Veolia’s 24.95 percent stake in Berlinwasser, which provides water for the German capital and is 50.1 percent state-owned, with the rest held by utility RWE (RWEG.DE), Cheuvreux analysts said.

Reuters reported last week that Highstar had lined up financing and made a final offer for Veolia’s U.S. waste business, Veolia ES Solid Waste Inc.

New-York based Highstar manages more than $5.6 billion through its infrastructure funds and owns waste management businesses in the north east and south east of the United States. Its waste business has been acquiring competitors, completing 30 acquisitions since 2005, according to its website.

    Veolia ES Solid Waste, based in Milwaukee, Wisconsin, is one of the largest solid waste companies in the United States, with 72 collection facilities and 29 landfill facilities in North America.

    Veolia said it expected to complete the sale to Highstar by the end of the year, subject to approval from U.S. competition regulators.

    “In the U.S. waste business, Veolia Environnement will continue to grow its activities in hazardous waste and industrial services,” Veolia said in a statement.

    Shares in the group, which are up around 10 percent from the start of the year after losing 61 percent in 2011, were up 1.5 percent by 1006 GMT.

    Barclays (BARC.L) and Credit Suisse CSGN.VX advised Veolia on the transaction, while Highstar was advised by Deutsche Bank (DBKGn.DE) and Macquarie (MQG.AX).

    ($1 = 0.8154 euros)

    Reporting by James Regan in Paris and Neha Alawadhi in Bangalore; Additional reporting by Benjamin Mallet in Paris and Soyoung Kim in New York; Editing by Ryan Woo, Jane Merriman and Sofina Mirza-Reid

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