UPDATE 1-Engie holding out for higher Veolia bid for Suez - sources

(Adds context on Suez’s reaction)

PARIS, Sept 1 (Reuters) - French utility Engie is holding out for a higher bid price to sell its stake in Suez to rival utility Veolia, three sources close to the matter said, adding that the firm was envisaging other options too.

Late on Sunday, Veolia said it was offering to buy a 29.9% stake in Suez from Engie for 15.5 euros a share, or 2.9 billion euros ($3.45 billion), as a prelude to bidding for the whole firm.

Engie believes a higher price would be justified, three sources familiar with the company’s thinking said.

“It’s not high enough, Veolia has to go over its proposition,” said one of the sources, a company insider.

Asked whether 17 euros a share would be the right price, as reported earlier by BFM TV, another of the sources said it would be “closer to what Engie would expect”.

Executives at Engie, which holds 32% in Suez overall, have also reached out to Suez to see if the firm would envisage buying back the stake, two of the sources said. One of the sources added that Engie also remained open to examining any offers from other buyers that might emerge.

Engie, Suez and Veolia declined to comment.

On Monday, Suez reiterated its confidence in its project as an independent company and said the unsolicited takeover from Veolia carried “great uncertainties”, without however rejecting the proposal outright.

Veolia has argued that bulking up in this industry was the best way to prepare for intensifying competition from new rivals from China.

It said it had seized on the opportunity for an approach after Engie flagged earlier this year that it was preparing to shed assets to simplify its sprawling structure and refocus on its most profitable businesses.

Shares in Suez were up 1.55% at 1202 GMT.

The 15.5 euros per share price marks a 50% premium to the Suez share price as of July 30, when Engie said it was reviewing options for the holding, Veolia said when presenting the offer. (Reporting by Benjamin Mallet, Writing by Sarah White, Editing by Sudip Kar-Gupta and David Evans)