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Veolia Environnement (Veolia) could consider Arriva as an alternative to Transdev in its attempt to merge transport subsidiary Veolia Transport with an industry partner, sources familiar with the situation and bankers told mergermarket.
Arriva, the listed UK-based international public transport group, and National Express, the UK-listed coach and train operator, would be potential matching partners for Veolia Transport in the event a deal with the French public transport operator Transdev failed, one of the sources said.
The French, listed, water and waste management services group made public on Tuesday 9 June its interest in merging Veolia Transport with Transdev. ”The new group arising out of the merger of the two units would seek a stock market listing as soon as conditions permit,” the statement said.
A second source familiar with the situation didn’t rule out Arriva or National Express as potential fits for a merger, but underlined that Veolia is not seeking to liaise with them at present.
An insider at Arriva said Veolia was interested in expanding in the UK public transport market.
Discussions between Transdev’s 75% owner Caisse des Dépôts et Consignations (CDC), seller of 25% of RATP, Veolia and the other interested party Keolis are at an early stage, according to insiders at Veolia and RATP and the sources. Veolia’s abrupt publication of a press release on Tuesday was seen as a sign of nervousness by different sources familiar with the situation.
“It shows Veolia is nervous about this deal and wants to affirm it is part of the process”, the first source speculated. Veolia is acting in an aggressive way because it might not be the favourite bidder, he said.
A third source agreed Veolia might be nervous, adding it really needs Transdev to spin off and list the transport division. The source speculated it would be difficult for Veolia to find a partner other than Transdev. “The only player interested was Arriva but they were asking too many conditions for the deal to go through,” the source said. According to him, it is very unlikely that Veolia Transport will manage to list on the stock exchange on a stand-alone position. ”They have lost many contracts this year: Stockholm, Bordeaux and possibly Melbourne,” the source said.
A sector banker could not see any other potential candidate for a merger with Veolia Transport.
Keolis is mainly controlled by financiers through Financiere Keos, holding 99.78% of the company. The financiers structured the business in order to maximize returns, a fourth source said. Therefore, Keolis has stronger economic performances than Veolia Transport – about the same EBITDA whereas Keolis has half of Veolia Transport’s turnover. Keolis also has the advantage of being more focused in northern Europe, whereas Veolia Transport’s activities are much more widespread, according to the fourth source.
Keolis reported EUR 3.17bn turnover in 2008, up 14.7%, and EUR 229.5m EBITDA, up 19.3%.
Disposing of its transport division would enable Veolia to survive financially in the short- to mid-term, a banker said. Veolia Transport reported EUR 6.059bn turnover in 2008.
Veolia, Arriva and National Express declined to comment.
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