Veolia to cut its stake in Transdev to 40%

Fair Value EUR12.9 (+59%)      BUY
News published on October Tuesday 23, 2012
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ANALYSIS

  • According to Les Echos, Veolia held a board meeting yesterday during which the members discussed an agreement reached with CDC, the co-owner of Transdev. The article also says that the French parliamentarians of the investment committee of CDC could also have given their green light last Wednesday.
  • In a release sent this morning, Veolia denied an agreement has been reached but implied that both entities are getting closer.
  • The agreement would lead Veolia to decrease its stake in Transdev from 50% to 40% following the conversion of debt held by the CDC into equity. This would allow Veolia to deconsolidate “more than half of the EUR900m of debt” linked with Transdev, according to the newspaper.
  • Recall that the EUR900m net debt is made of ~EUR200m of financial net debt (already classified as discontinued operations in the balance sheet) and EUR700m of inter-company loan. We understand the deal implies for Veolia a recovery of EUR350-400m from this EUR700m.
  • With the Transdev case simplified, we believe Veolia will now be able to work on the sale of its remaining stake, with no urgency though as this should represent an equity consideration of only EUR100-125m.
While not the blue sky scenario, if achieved, we would take this as very positive given the very low expectations within the market. This is fully in-line with the group’s strategy to sell EUR5bn of assets by the end of 2013. Including Transdev, ~75% of the disposal targets would have been reached. More importantly, Veolia would be close to reaching its net debt target of EUR12bn by YE13 as of YE12, providing good sentiment on the positive impact of the restructuring.

Julien Desmaretz, jdesmaretz@bryangarnier.com

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