FRANCE: SUEZ together with Caisse de dépôt et placement du Québec (“CDPQ”) has entered into a binding agreement to purchase GE Water & Process Technologies (“GE Water”) from General Electric Company for EUR 3.2 Bn enterprise value in an all?cash transaction. GE Water is a worldwide leading systems and services provider for industrial clients, supplying state-of?the-art water, waste?water and process systems solutions to blue?chip customers.
GE Water has generated USD 2.1 Bn revenues in 2016 with 7,500 highly?skilled salesmen and engineers with strong digital capabilities. The transaction, unanimously approved by the Board of SUEZ, combines two complementary players, covering the entire value chain making SUEZ a leader in water resource management. It enhances SUEZ’ long term profitable growth, and offers an unparalleled value proposition to SUEZ shareholders:
- Broadened access to industrial clients, with significant scale up effect boosting go?to?market capabilities and sales force
- Strengthened international footprint in key geographies, notably in the US and emerging markets, reinforcing the group’s position in a fast growing addressable market of c. EUR 95 Bn worldwide
- Increased innovation capabilities to deliver performing solutions, with a worldwide network of R&D centers, a large portfolio of patents and a cutting?edge digital platform “InSight”
- Expected to generate significant cost and revenue synergies
- EPS accretive and positive free cash flow from year one, double?digit EPS accretion based on run?rate cost?synergies
- Bridge financing fully secured, to be refinanced through a capital increase of c. EUR 0.75 Bn and a combination of long?term senior and hybrid bonds. SUEZ main shareholders Engie, CriteriaCaixa and Caltagirone Group already confirmed their intent to participate in the capital increase for their pro rata share.
- Fully aligned with the Group’s financial discipline, transaction to maintain strong investment grade rating profile
Jean?Louis Chaussade, CEO of SUEZ, said: “I am very proud to announce the acquisition of GE Water, which will accelerate the implementation of SUEZ’ strategy by strengthening its position in the promising and fast?growing industrial water market. This combination will create further value for both our employees, clients and shareholders. Clients will benefit from the combined knowledge, expertise, geographic footprint and leading edge products and services available. The transaction will also deliver strong value to our shareholders by enhancing SUEZ’ profitable growth profile. I look forward to integrating GE Water’s highly skilled staff to our teams to form an unparalleled industrial water platform. We are also thrilled to join forces with CDPQ, which shares our long term vision for our business.”
“GE Water has positioned itself as a key player in the water treatment industry thanks to its cutting edge technology and a management team that has proven itself highly skilled at leveraging that competitive advantage,” said Michael Sabia, President and Chief Executive Officer at CDPQ.
“Operating in a core industry, GE Water has built a premier business with recurring revenues and a high?quality and diversified customer base. This investment is therefore highly aligned with CDPQ’s long?term vision and its strategy of increasing its emphasis on stable assets anchored in the real economy, alongside key operators such as SUEZ.”
Commercial Synergies and Efficient Complementarities
- GE Water is very well positioned in the EUR 95 bn global industrial water market, growing at an expected 5 % per annum, driven by regulations, environmental and economic performance. GE portfolio is diversified and well balanced in terms of geographies (50% of the revenues in North America and 50% in the rest of the world) and verticals. The acquisition will enable SUEZ to realize significant cost and revenue synergies:
- The integration of GE Water will give SUEZ the opportunity to widen its systems and service offerings, leveraging SUEZ expertise in O&M and GE Water best?in?class digital platform InSight. The cross selling opportunity is further increased by SUEZ and GE Water’s complementary customer base, industry verticals and value chain and geographies,
- The contribution of GE Water to SUEZ Industrial Solutions business will enable the group to further optimize its operations in manufacturing supply chain, engineering and services deliveries,
- Finally, the transaction provides potential for further cooperation and business opportunities with SUEZ’s other businesses, notably in the areas of recycling and resources / energy recovery
Full benefit of cost and revenue synergies realized by year 5:
- EUR 65 million impact on EBITDA from identified annual run?rate cost synergies (of which 80% achieved in year 3),
- Implementation costs, spread over 2017?19, equal to one year of cost synergies
- EUR 200 million of revenue synergies per year, value?enhancing transaction, fully aligned with the group’s financial discipline
The acquisition of GE Water will enhance shareholder value:
- Improved top?line growth profile,
- EPS accretive from year one,
- Double?digit accretion on EPS based on run?rate cost?synergies,
- Positive on Free cash?flow from year 1
- SUEZ will acquire along with CDPQ, in a 70/30 joint venture, 100% of GE Water for an enterprise value of EUR 3.2 Bn, in an all cash transaction. SUEZ will then contribute its existing industrial water activities (following consultation of Work Councils) to the newly dedicated Industrial Water business unit. This acquisition price represents 10.0x2016, EBITDA including cost synergies and 12.8x 2016 operating cash flow including synergies
- SUEZ has a fully underwritten bridge financing in place for the transaction, contemplated to be refinanced through:
- a capital increase of EUR 0.75 Bn, SUEZ main shareholders, Engie, CriteriaCaixa and Caltagirone Group confirmed their intent to participate in the capital increase for their prorata share.
- a long?term senior bond for EUR 1.1 Bn
- hybrid bonds for EUR 0.6 Bn
- EUR 0.7 Bn equity provided by CDPQ
- The company’s objective is to preserve its strong investment grade rating profile
This transaction is expected to close by mid?2017 and is subject to receipt of required regulatory approvals (merger control authorities), including the European Union and the United States, and other customary closing conditions. The implementation of this project is previously submitted to the opinion of the European Works Council.
SUEZ supplies drinking water to 92 million people, delivers wastewater treatment services to 65 million, recovers 16 million tons of waste each year and produces 7 TWh of local and renewable energy. With 82,536 employees, SUEZ, which is present on all five continents, is a key player in the sustainable management of resources. SUEZ generated total revenues of EUR 15.3 billion in 2016.
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