On December 14, the Commission conditionally approved the proposed acquisition of Suez by Veolia (“the Transaction”) following review in Phase I.
The Commission cleared the Transaction subject to divestiture remedies in the water and waste sectors in Europe and France, including the markets for (i) municipal water management, (ii) industrial water management in France and mobile water services in the European Economic Area (EEA), (iii) the collection and treatment of non-hazardous and regulated waste, and (iv) the treatment of hazardous waste in France.
Veolia and Suez both offer water treatment and waste management services to municipal and industrial customers.
On August 30, 2020, Veolia announced its intention to acquire its rival Suez through an acquisition structured in two steps: first, the private acquisition of a non-controlling minority stake (29.9%) in Suez from Engie (in October 2020), and, second, a public tender offer for the entire outstanding share capital of Suez (launched in February 2021).
Gun-jumping allegations as takeover defense
Until Veolia and Suez finally reached agreement over the takeover, Suez fought an intensive battle that lasted more than seven months, making Veolia’s bid only the sixth hostile takeover bid in France since 2010. In its defense, Suez employed a number of tactics including, inter alia, legal action in the domestic courts, the search for a third-party investor (also known as a “white knight”) and the creation by Suez of a Dutch foundation whose board members would have had veto rights over any disposal of Suez’ French water business. This latter move was intended to prevent Veolia from selling the French water business to remedy the Commission’s anticipated competition concerns in the water sector in France. Suez abandoned its defensive actions after the companies reached agreement in April 2021.
As part of its takeover defense, Suez called on the Commission to stop Veolia’s efforts under the Commission’s gun-jumping rules. Suez claimed that Veolia’s acquisition of the minority stake in Suez from Engie infringed the standstill obligation under Article 7(1) of the Merger Regulation by implementing the first step of a single concentration prior to obtaining the Commission’s clearance.
In parallel, Veolia had applied for an exemption to the standstill obligation under Article 7(2) of the Merger Regulation (the “Article 7(2) exemption”) prior to acquiring the minority stake in Suez. The Article 7(2) exemption applies to the implementation of a public bid or a series of transactions in securities, provided that the purchaser notifies the transaction to the Commission without delay and does not exercise the related voting rights until the acquisition has been cleared.
The Commission rejected Suez’ line of argument in a separate decision on December 17, 2020. Although it agreed that the minority stake in Suez and the subsequent public takeover bid formed one single concentration, it rejected Suez’ argument that the former was unlawful. Applying (and clarifying) the Court’s rulings in Ryanair/Aer Lingus and Marine Harvest, the Commission held (i) that the acquisition of a non-controlling stake can be subject to the standstill obligation when it is part of a broader plan to acquire control over the target, and (ii) that the Article 7(2) exemption can apply to hybrid series of transactions combining private securities transactions and a public takeover bid. The Commission therefore concluded that Veolia could benefit from the Article 7(2) exemption, and that the acquisition of a non-controlling minority stake in Suez did not constitute a gun jumping infringement.
Divestiture commitments to “rule out ‘serious doubts’” in Phase I
Following almost one year of pre-notification discussions, the Transaction was notified to the Commission on October 22, 2021. The Commission’s investigation indicated that the Transaction would raise competition concerns in the markets for municipal water management in France, industrial water management in France, mobile water services in the EEA, the collection and treatment of non-hazardous and regulated waste in France, and the treatment of hazardous waste in France. The investigation however confirmed that the Transaction did not raise concerns in any other horizontally affected markets or for any non-horizontal links between the Parties created by the Transaction.
In order to address the Commission’s concerns, Veolia offered a package of structural commitments that include the divestment of almost all of Suez’ French non-hazardous and regulated waste management activities and municipal water management activities to a newly created entity called “New Suez.” Veolia further committed to divest its activities of mobile water services in the EEA, almost all of its French industrial water management activities, and part of Veolia’s and Suez’ hazardous waste treatment activities. For the creation of “New Suez,” Veolia and Suez signed a commercial agreement with a consortium of investors earlier in 2021, which the Commission approved a few weeks after the clearance of the Transaction.
The Commission cleared the Transaction on December 14, 2021.
Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer
 See European Commission Press Release, “Commission approves the acquisition of Suez by Veolia, subject to conditions,” December 14, 2021, available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6885.
 See, e.g., Veolia Press Release, “Veolia acquires 29.9% of Suez’ capital from Engie and confirms its intention to acquire control,” October 5, 2020, available at: https://www.veolia.com/en/newsroom/press-releases/veolia-acquires-299-suezs-capital-engie-and-confirms-its-intention-acquire.
 See Veolia Press Release, “Veolia and Suez announce that they have reached an agreement allowing the merger of the two groups,” April 12, 2021, available at: https://www.veolia.com/en/our-media/newsroom/press-releases/veolia-and-suez-announce-they-have-reached-agreement-allowing.
 See Peggy Hollinger, “Suez-Veolia hostile bid battle tests European M&A law,” March 17, 2021, Financial Times, available at: https://www.ft.com/ content/47fb3352-be00-46e7-9a2c-7bd0a139cba5.
 See Christopher Thompson, “Suez white knight is a flawed M&A savior,” October 2, 2020, Reuters, available at: https://www.reuters.com/article/us-veolia-m-a- breakingviews/breakingviews-suez-white-knight-is-a-flawed-ma-saviour-idUSKBN26N1R2.
 Suez amended its bylaws to require unanimous consent by its shareholders to any sale, giving the foundation de facto veto power.
 Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings, OJ 2004 L24/1.
 Veolia/Suez (Case COMP/M.9969), Commission decision of December 17, 2021.
 Aer Lingus Group v. Commission (Case T-411/07), para. 83.
 Marine Harvest v. Commission (Case T-704/14), para. 191.
 Veolia/Suez has seen one of the longest pre-notification periods in recent years (the average of pre-notification in Phase I cases usually lasts between two to three months).