Veolia Environnement SA (VIE) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Veolia webcast. I now hand over the floor to Mr. Antoine Frérot, CEO; Estelle Brachlianoff, COO; and Claude Laruelle, CFO. Madam, gentlemen, please go ahead.

Thank you, and good morning, ladies and gentlemen, and welcome to this conference call to which you were invited yesterday evening for news about Veolia. I am with Estelle Brachlianoff, our COO; Claude Laruelle, our CFO; and Olivier Brousse, our Head of Strategy. And I am on Page 3 of the slide show. Following ENGIE's announcement on July 31 that is why we have launching a strategic review of some of the assets, including their stake in Suez, I have decided, with the unanimous approval of our Board of Directors, to propose to acquire 29.9% of Suez shares out of ENGIE's 32% stake at EUR 15.5 per share. As you can see on this slide, this all-cash offer with a 49% premium on the unaffected last 3 months average share price is the starting point of a great industrial project that addresses the global challenges facing our planet and societies. This project is to create the global super champion of ecological transformation. If ENGIE accepts our offer, Veolia will then launch a tender offer on Suez remaining share capital. According to the stock market regulation, the characteristic of this tender offer will be fixed when it will be submitted. On Page 4, we have here a unique opportunity to create the world champion of environmental transformation by bringing together the men and women of Veolia and Suez in a project that will benefit all of their stakeholders. The environmental priority is stronger than ever. The climate change emergency is before our eyes. Every new investment plan being decided by governments is built around this need to tackle the climate emergency and to take into account the impact of human activity on the planet. The European Green Deal is, of course, the clearest example to date of this policy. The unique complementarity of assets, geographies, know-hows, technologies and clients between Suez and Veolia is a major advantage in addressing this global challenge. The combination between Suez and Veolia will accelerate the execution of the strategies of both groups by creating a stronger combined entity with a common corporate structure and shared values. For all these reasons, this is a strong value-creating transaction for all stakeholders. Our clients will benefit from a broad offering and our employees from greater job opportunities. Our shareholders will also benefit from a significant double-digit EPS accretion. On Page 5, all of our activities, Water, Waste and Energy, benefit from highly favorable and accelerating mega trends. I have already mentioned the climate change emergency, but there are also the global issues of increasing water scarcity, the need for efficient food chain management to feed growing populations, faster urbanization and its consequences on water supply, waste management and energy needs. Faced with such trends, many governments have reacted and have launched significant investment programs to try to stop these harmful environmental impacts. Moreover, in our businesses, digitalization enhances the benefit to our clients and improves the management of our facilities. The markets that our 2 groups address are huge, with more than EUR 1.4 trillion spent every year. The combination of Veolia and Suez will thus create the main player in a world market that is still very fragmented. As you can see on Slide 6, the transaction we proposed would take place at the time when both groups have launched their new strategic plans with similarities, more international, retail developments on industrial client base and with the common objective to become the world leader in ecological transformation for Veolia and in environmental services for Suez. The combination would establish this undisputed worldwide leadership immediately and would accelerate the achievement of both groups' strategic objectives. On Slide 7, our geographical footprints are complementary, and we would also be able to strengthen our positions in several priority countries. We are often among the top players in various countries, but sometimes with a relatively limited market share. By bringing together our asset base and portfolio of clients, we would become bigger in Europe, where our countries of operation are very complementary, Suez in Southern Europe, Veolia in Central and Eastern Europe, for example. And outside Europe, in the rest of the world, the group's revenue would increase by 50%. We would thus immediately meet our goal of reinforcing our international exposure. We will have to address a limited number of antitrust issues, mostly in France, as outside of France, there is very little overlap. Accordingly and -- to ensure the success of our project, we have already found a partner, Meridiam, that is very interested in Suez French water assets. All of Suez French water activities, including its water R&D and engineering teams, would be acquired by this French long-term investor, Meridiam. Meridiam is a world leader in infrastructure management and financing for municipalities so that French water -- Suez French water would continue to grow and develop activities. There would also be some assets to divest in French waste and very few assets abroad. As you'll see, we have really worked extensively on these potential antitrust issues and on ways to resolve them so as to ensure the full success for our projects. The map on Slide 8 shows the combined geographical footprints of Suez and Veolia. And you can see clearly the benefits of the transaction in all our geographies, in particular, outside Europe, with doubling of revenue in Australia, Africa, Middle East, Latin America, and a revenue increase of 50% in the United States. On Slide 9, the combination of the 2 groups' competencies would give our clients a unique and innovative range of services to initiate or accelerate their transition towards greater environmental efficiency. The new group would thus become the leading player in the ecological transformation underway. We would be in a position to offer the full range of contractual models as well as to strengthen our leadership in hazardous waste, in other segments of the circular economy and in energy efficiency. Finally, bringing together the technologies of Veolia Water Technologies and of Suez water technology solutions would create a unique and cutting-edge technological arm in Water, with the widest range of solutions to address environmental needs of industrial and municipal clients. On Slide 10, the transaction would also enable us to combine and enlarge our client portfolio. Our usual client base are wide and will continue to be reinforced. Today, Veolia is ahead of Suez in terms of industrial and tertiary clients, which represent 47% of our revenue versus 40% for Suez, enabling us to accelerate the rebalancing of the combined portfolio by bringing together both sales force and leveraging Veolia's experience. On Page 11, the European market is obviously of paramount importance to both Suez and Veolia, 2 French-based groups with a worldwide presence. The new combined entity would become the main corporate player in the European Green Deal launched end 2019 as it would be uniquely equipped to provide solutions in many areas targeted by the European Green Deal initiative. This is particularly true in the deals of lithium battery recycling, hazardous waste, energy efficiency, all circular economy projects and the development of alternative energies such as refuse-derived fuel. This operation is, therefore, an opportunity to transform the Green Deal ambitions into reality. On Page 12, our 2 groups are essentially service providers, which means that our main know-how lies with our employees. This industrial project is about bringing together the 89,000 employees of Suez and the 179,000 employees of Veolia. The combined entity would have nearly 270,000 people with very similar corporate cultures and values. Suez and Veolia each have over 100 years of experience. They both have very long histories of partnering with municipalities and industrial clients to provide them with water and waste solutions and, in Veolia's case, with energy services as well. They both developed their activities first in France and then internationally, with the same commitment to excellence that has made them the best-performing environmental service companies in the world. The transformation that Suez has initiated with its SHAPING 2030 plan is very comparable to the transformation journey Veolia has achieved to become a high-performance company with a greater presence in fast-growing markets. By becoming part of this new combined entity, we will share with Suez our experience and track record. The Slide 13 shows the financial profile of the combined entity once the asset divestments required by antitrust bodies mostly in France have been completed. The combined new group would have revenue of over EUR 40 billion with an EBITDA of EUR 7 billion and an EBITDA margin of 17%, providing solid financial headroom to finance new projects while preserving a strong balance sheet. The business mix would be approximately 45% in Water, 40% in Waste and 15% in Energy. These 3 pillars are all in fast-growing markets and will each continue to grow at a certain pace. On Slide 14, you see that the operation will generate EUR 500 million of synergies in 4 years. Most of the synergies would come from operational efficiency levels through sharing the best practices of each group as well as through purchasing savings of the volume effect. Veolia has proven over the past 9 years its ability to continuously improve its operational efficiency, for instance, in the management of its incinerators, the optimization of waste flows and the inclusion of digital tools to better manage our facilities and our clients. A recent example is all this acquisition we have entered into exclusive negotiations with Suez to buy their EUR 300 million subsidiary specializing in the maintenance of sanitation networks and on-site and full services, the competitor of our subsidiary, SARP. The sharing of SARP's processes and standards with OSIS will allow for a significant increase in OSIS' EBITDA. This is just one example of what we plan to do within the combined Suez-Veolia. On Page 15 now. We can comfortably finance the acquisition of ENGIE's stake in Suez. We have a solid balance sheet. The leverage ratio stood at 2.66x at year-end 2019. At the end of June 2020, Veolia's liquidity position amounted to EUR 12 billion, including EUR 8 billion of cash and more than EUR 4 billion in undrawn credit lines. We benefit from particularly attractive financing conditions. We issued EUR 1.7 billion of bonds in 2020 with interest rates between 0.7% and 1.25% for duration between 8 and 11.5 years. This operation will be financed with the objective of maintaining a solid investment grade rating. On Page 16, this exciting industrial project would be accretive to EPS from year 1 and reach a high double-digit accretion level from year 3 after the integration. On Slide 17, you see the key steps of the proposed transaction. We have made an offer to ENGIE to buy 29% of -- 29.9% of Suez at EUR 15.5 per share. If ENGIE accepts our offer, Veolia will then launch a tender offer on Suez's remaining share capital. According to the stock market regulation, the characteristic of this tender offer will be fixed when it will be submitted. We will inform the employee representative bodies and antitrust authorities to obtain their approvals and proceed with the asset divestitures required to finalize our industrial project. On Slide 18, yes, ladies and gentlemen, yes, this project is a unique opportunity because our 2 groups have always been complementary, but especially so since the launch of our respective strategic plans. And to finish on Slide 19, combining our strengths within a single group will considerably accelerate the execution of our strategic plans, enable us to go faster and further, and to offer the best to our clients, employees and shareholders. This exciting project is a perfect fit with Veolia's purpose and would position the new entity to address the main challenges of this century, the ecological transformation. Thank you for your attention, and we will now take your questions.

[Operator Instructions] Our first question comes from Vincent Ayral, JPMorgan.

Congratulations for the move. A [Technical Difficulty] question here. Obviously, the first one that strings on line is the [ indebtedness ], the gearing. When we run numbers, basically, and if it was all [Technical Difficulty] we'll get to above 4x net debt-to-EBITDA. So that would imply some level of capital increase, a way or the other. So in this respect, I'd like to know -- can you hear me?

We hear you very badly. Could you repeat, please, slowly all your questions?

Yes. All right. So first, congratulations. Second, running quick numbers would -- with the debt, financing of the transaction would put the group above 4x net debt-to-EBITDA, so that would imply some need for capital raising. So first question is what is for you, the hybrid capacity that Veolia has at this stage? Could you make use of that? Or would it need to go beyond hybrid capacity in terms of capital raising? Now when we do assume some capital raise, we got an EPS accretion of about 25%. It could be higher if the capital increase is lower, obviously, that's our assumption. But do these numbers make sense for you? Third question is on the U.S. tax assets. You have won the IRS case 2 years back for $460 million, which was to be used before 2026. So does this move, if it happened, basically solve the question of how to get a tax accrual base to use these credits? And finally, on jobs, you say in your press release yesterday that Meridiam made a commitment regarding acquisition offer, the Suez water -- French water assets if deal go through, and that the whole transaction would basically protect jobs in France. Did Meridiam make any specific commitment in this regard? That's pretty much it for the first round of questions.

Thank you, Vincent. I will take the last question, and Claude will answer your several questions about finance. Yes. We told yesterday that this operation will have no negative impact on jobs in France because, as I just explained, this operation is to create a champion which will create new activities, new technologies, new businesses and new jobs, including France, not only outside of France. And globally, we will have no negative impact on the jobs in France.

Antoine -- Vincent, concerning the financing. Let's talk first about the current situation of the group. As you know, we have started our strategic plan with a lot of balance sheet headroom and with leverage of 2.66 at the end of last year. On top of that, as Antoine said, this year, we have issued EUR 1.7 billion of midterm notes. So we have more than enough cash for the first phase of the operation, which is the acquisition of 29.9% of ENGIE's shares. Regarding the second phase, it's a little bit early to talk about it as it will happen in 18 months from now. As we said, our main objective is to remain solid investment grade, and we will find the most efficient way to achieve this objective, keeping in mind that there will be remedies and also that both companies have asset protection plans. I can say that hybrid issue or rights issues are possible options. But as I said, it's too early to talk about it in detail. As we said also, the deal will be accretive double digits on the EPS -- on EPS.

Our next question...

Can we have the answer for the U.S. tax asset, please? Just the last one, which was not answered. The third question was regarding the U.S. tax assets.

So on the tax credit, because we will be, first of all, sorry, bigger in the U.S. and that we will have the combination of both groups in the U.S., the combination of the 2 groups will have a positive effect in the U.S. So we will be able, by this operation, to benefit from the tax credit that we have in the U.S. It will be same in France by combining the 2 groups. That will help us also to take advantage of the tax credit that we have in France.

Our next question comes from Emmanuel Turpin, Societe Generale.

I would like first to follow through on Vincent's questions about financing. You just said that you would consider what would be the best or the most efficient way to finance the second tranche of the deal when time comes. But as we stand now, could you share with us what would be -- what sort of net debt-to-EBITDA you would like to see for the combined entity on the first year after the transaction? Would you stick to the standard level of comfort on net debt-to-EBITDA at around 3x and therefore tailor your equity or quasi-equity instruments to reach that number? Or would you accept to be higher than that 3.2x, 3.5x, giving time for synergies to work their way through the cash flow? That's my first question. Second question, on potential remedies. You highlight EUR 4 billion of revenues as an estimate of the revenues attached to the assets you envisage you would have to sell. Could you please give us an estimate of the EBITDA related to those EUR 4 billion? And regarding the Meridiam agreement, what visibility do you have through this agreement today about the transaction price for the French water business of Suez? As you said, this transaction may take a while. Do you have a fixed price? Or -- how will you deal with, I would say, the fact that time passes? And my last question would be about synergies. You envisage around EUR 500 million of operational synergies for this transaction. This is a big number, but the merged -- or the new entity -- the combined entity would be even larger. And so my first reaction is that EUR 500 million is actually not a lot if you step back and look at the combined size of the groups. And it would be interesting to understand whether you believe there could be further synergies beyond those EUR 500 million. I get that it's a bit early maybe to discuss figures, but do you believe that the EUR 500 million fully cover the potential of overall operational synergies, not only cost that you would gather from this transaction? I'm wondering if you've taken into account the likes of optimization of the waste assets, internalization rate, fleet, et cetera, et cetera.

Okay, Emmanuel. I will answer first about Meridiam, Estelle will answer your questions about synergies, and Claude will come back on the financial structure. With Meridiam, we have an agreement -- binding agreement, commitment to buy the Suez water business, and the price is with parameters, explain a certain indicator. We precisely describe the indicators in the agreement, and there is a multiple on this agreement. This price, I would say, is confidential, so I will not be in a position to give it to you. But because we need to have some -- a bit more information to precisely have the precise price we prefer with them to parameter the price they are committed to pay. Is it clear?

Is there a time limit to this agreement?

Yes. 2.5 years.

And could this indicator be EBITDA, for instance?

I cannot tell you. But it is, of course, an indicator which represents the value accretion, as you could understand. About synergies, Estelle?

Yes, about the synergies. First things first, to say that the synergies we've put on the slide, the EUR 500 million, is only cost synergies here. So we haven't included any revenue synergies, neither any CapEx that we could save by putting the 2 groups together. In terms of those EUR 500 million, I would comment on the fact that it's a high number. We are very confident we can deliver, and it's very comparable to comparable transactions as well. And it's really operational synergies we're talking about here. So we have a full list here, a detailed full list, which includes some of the things you've mentioned. We have real estate and optimization of the footprint of our buyers, like installation of the work, we have productivity synergies and improving of the yields of all of our assets, we have procurement, internalization of the waste flows, fleet optimization as well and things such as digital and putting together the best of both worlds in terms of digital. I would say, altogether, the whole mindset is about taking the best of both worlds in all those management. As Antoine said, we really want to put the strengths together of those 2 large groups.

Claude?

I can first answer the second question about the potential synergies. We were talking about EUR 4 billion of revenue. So in terms of EBITDA, if you understand the Slide 13 correctly, it means that the EBITDA of the disposal is matched by the synergies. So it's the same order of magnitude, to answer your question, Emmanuel. And last, regarding the financing and the balance sheet, I would say, equilibrium of the future group, the midterm objective will be the same as what we have designed in our group today, which is net debt-to-EBITDA below 3 as a midterm objective.

Too early to mention year 1 in net debt-to-EBITDA. Would you have -- would you consider being above 3x? I guess that's the implication of your answer.

Medium term could not be year 1.

Okay. So you're happy to be above 3. Okay.

Our next question comes from Julie Arav, DNCA.

I have one. I was just wondering the scope of Suez, which is of interest for you. As you mentioned and as we all know, you are both engaged into a massive disposal program. Suez announced up to EUR 4 billion. I'm not sure whether the U.S. and the Chilean water regulated assets is core to you or not, given that you already disposed this kind of assets in the past. So just wanted to get your view on what exact perimeter of Suez would be of interest and whether Acea and Agbar would be also core in the future group in your opinion.

Julie, you know that we just began this long run for this operation. And of course, we are buying all the shares of Suez, meaning that we are buying all the activities of Suez, meaning that all these activities are [indiscernible]. So it is too early to give any precision about that. We are -- we will imbibe all of that, and we -- first, we have to divest for antitrust issues some businesses, and we will see for the rest. It is not time to discuss what is good and what is not good in Suez. All is good today.

Our next question comes from Olivier Van Doosselaere, Exane.

Thank you very much for taking our questions on this important transaction. I had 3 questions also, if I may. The first one is maybe a bit of color, if we can, on your perception of execution risk and more in particular, I guess, even if there is an ENGIE support for this transaction, how confident are you that actually the -- as you call the -- as you mentioned, the close-up proximity would actually work in practice, given also the long-standing rivalry between Suez and Veolia. I wonder how you feel about the risk of potentially facing some hostility within the Suez organization if it happens on an unsolicited basis. And in parallel then, how you -- what's your confidence if that Suez will, on their side, will continue to execute their strategy plan today given the uncertainty that you are creating? And second one, if we could just come back to clarify one point on the financing. So you mentioned the medium-term ambition to be at around 3x net debt-to-EBITDA. Obviously, hybrids are not in that. And I just wonder if we could explicitly mention the fact that you had in the past hybrid yourself, although you chose to pay them back, would you feel comfortable in issuing new hybrids again to potentially fund part of this transaction? And the third question was just what you felt this transaction will do on your returns on capital employed and your aspiration on that sense, given the likely goodwill to be paid here.

Okay. I will begin, Olivier, to answer the first question, and I will leave my colleagues to answer the following ones. First of all, about the support of ENGIE, we just put our proposal yesterday. So of course, they're informed, but they did not comment. They will study it strongly, and I could not tell you what they are thinking about it. You understood certainly that we choose this scheme by proposing them to buy immediately without conditions the 25 -- the 29% to help them to put in place and accelerate their own strategic plan without waiting for 18 months to get the money. So I think it could be attractive for them, but of course, they will decide if it is or not. About the execution risk, the main risk, of course, comes from antitrust issues. And it is why we so precisely studied it and proposed -- already proposed some strong and I think really good remedies with our agreement with Meridiam. The biggest issue, of course, is water in France. And I think Meridiam is the best possible shareholder of this business to propose to it a real good future. So for the rest of the execution risk, we don't have a lot of other big antitrust issue, and so I am really confident to be able to make this operation. About the people and the culture of the 2 groups, it is true that Veolia and Suez has [indiscernible] but it is also true that these 2 companies somewhere built the professional vision of how to do this business of water management of cities and industrial or waste management. So they share the same strategical values and the same ways to make these businesses. And when we compare with other businesses or other companies around the world, we see that we have much more proximity with Suez's way of business than with others because we grew together with realities, commercial realities, but progressively, with a same progressional vision. And then there is not a lot of difference about DNA between the 2 companies. So I am really confident that there is no problem of mixing of the 2 cultures. And you know sometimes we lose some contracts in the Water business in France, and they lose some contracts, we win them. And so we are used to welcome some teams of them as they are also used to welcome some teams of us, and there is no problem for that. And with all these transactions, we will see that it is -- there is a clear proximity of culture, DNA and values between the 2 teams.

In terms of financing, to precise a little bit what we have said, again, Olivier, our main objective is to remain solid investment grade, and we will design -- for the second phase, we will design the most efficient way to achieve this objective. And as I said, hybrid issue is a possible option, but today, it's too early to talk about it in detail. In terms of return on capital employed, the objective is to bring what we will acquire to a level which is comparable of what we have today, which is between 8% and 9% post tax once the integration is completed, and that will be done also through the synergies. So it will be a significant improvement compared to what we have today on the Suez side, and that will increase significantly. It's, roughly speaking, plus 400 basis points on their side.

Our next question comes from Arthur Sitbon, Morgan Stanley.

I have 2. The first one, I was wondering if that transaction would have any impact on your current investment plan, for example, regarding the external growth objectives that you have included in the plan at the moment. That's the first one. The second one is I was wondering if in terms of anti-competition potential remedies, if there would be any deal-breaker to you. What I mean by that is if you had to sell a particular division that, let's say, would be very important to the achievement of the synergy budget, could you actually -- well, could that lead to any change in the way you see the transaction?

Okay. Obviously, I don't see any case where antitrust issues will force us to sell something which will be key for us in the deal. So I don't see any deal-breaker. We carefully studied with a lot of advisers what we have to do. We are now quite certain that outside France, the remedies are very few. But even if there are a bit more than very few, there is no problem to reach an agreement for that. And in France, we are already ready to sell all the Water business and a part of the Waste business, so I don't see any deal-breaker. So we are really confident we are able to solve any issue of our business. About our current investment plan, you know that we launched beginning of the year a 4-year program, IMPACT 2023, with the reduction of our assets program. And during the 4 years, EUR 3 billion of divestments and EUR 5 billion of investment -- new investments. We are just at the beginning of this program, 9 months from the beginning and with the 3 months of the crisis, so just at the beginning. So of course, we will have to adapt our plan of investment and divestment, taking into account these big new projects we have now. And we will have to adapt it, taking into account the actual activities of Suez -- the projects of Suez and our own projects and to select the best opportunities to stay in the range of our guidance in terms of capital employed and in terms of ratio of debt.

Our next question comes from [ Thomas Petrovich ], [ Good Life ].

Thanks for organizing the call in the morning. Obviously, not for me the best Monday, considering the bank holiday in U.K., but obviously, you're working hard in France. A quick question here. When you do the math, obviously, you're playing pretty heavy premium versus the under terms Suez Environnement price. When you look at the synergies you announced of EUR 0.5 billion, and they're going to be obviously achieved over the next coming years before the deal completes, so it's probably 5 years before we get there. If you discount it back, kind of put a multiple on it, you're pretty much paying out those synergies to Suez -- to basically ENGIE and Suez Environnement shareholders. What's in it for me as a Veolia shareholder then? That's question #1. Two, can you not just accelerate your own growth without doing the deal? And three, do you -- considering you're going to be really involved in that deal now over the next coming 12 to 36 months trying to sort it out, would there not be a negative implication of the organic growth of the business?

So growth terms -- in terms of -- what we are seeing in terms of Veolia shareholder benefit is the accretion on EPS, and accretion on EPS will be double-digit after -- on year 3 for the shareholders of Veolia. So it's -- on their side, it's a very significant accretion. So it takes into account the synergies and the combination of both groups, but also the disposal on the remedies all combined will be double-digit significant accretion on EPS for Veolia shareholder.

Sure, but you're going to increase the leverage as well at the same time. You could have achieved that by doing a buyback. You're trading at 15x earnings next year, so you're buying Suez at 25x earnings. Even with synergies, this doesn't strike me as a fantastic deal, and it's a complex deal.

We had before this operation, with IMPACT 2023, a clear growth strategic plan. This operation accelerates our plan of growth. So of course, growth, if it is a good growth, and we think we are able to do a good growth will benefit of the shareholders of the new entity, meaning the actual shareholders of Veolia, first. Secondly, with the price we proposed for the share of Suez, we take into account a part of the synergies' value we can extract from this deal, but not all the parts, of course. We share the benefits of these synergies between the 2 types of shareholders, Suez, one side, Veolia, other side. And as Claude just mentioned, to increase a lot -- more than double the EPS for our shareholders means that through first, growth; secondly, synergies, cost synergies, we leave good parts, I hope the biggest parts, of all the benefits of this transaction to Veolia shareholders.

Right. Okay. Understood. Can you just maybe give me about color as well? Obviously, you're talking about EUR 500 million synergies. There's obviously a bit of disposals there. How much of those -- what are the cost of cash outflow behind those synergies if you want to achieve them? And how would the cash flow profile of the group would look like over the next coming years during the process?

So I guess, in terms of cost to extract those synergies, if it's your underlying question, we assume they will be limited since, as I explained to you earlier on, those synergies are really cost synergies driven by the share of best practice and operational synergies. So I guess I don't see a big negative impact or whatever to extract those synergies in the first few years, if it's your underlying question.

Our next question comes from [ Aman Reis ], Kepler.

This is Juan Rodriguez, Kepler. I have a quick question. In terms of the dividend on Suez and the price paid, do actually Suez shareholders will -- the price paid, does it include the dividend or not? Or the price will be adjusted on a percent of the dividend payment for Suez?

In terms -- you are talking about Suez dividend? Or -- what do you mean?

Yes. On the price that you offer, EUR 15.5. Does it include dividends, and Suez shareholders will receive the dividend?

Yes. The EUR 15.5 is including the coupon of Suez shares, to answer your question, of 2020.

[Operator Instructions] Our next question comes from Fraser McLaren, Bank of America.

Just a few questions, please. In the Suez 2030 plan, there are a number of actions that it is planning to implement below EBIT. Just wondering if there's any particular features of Veolia's structure that you think could help in achieving those actual benefits. And then in terms of the timescale, I mean, in the next 18 months, Suez could be well down the road of its disposal program. What happens if this involves divisions that you'd like to keep? Is there a result that, that would alter your view of the value of the deal? And then lastly, what about a scenario where there is an insurmountable antitrust problem or Suez is hostile? Would you be happy being a long-term investor in Suez if you couldn't complete the deal?

Okay. About the question of the -- about the divestment of trade. The -- all this case would say that they can sell some assets, which would be very interesting for us, and in other cases, it will not be the case. So of course, we will try to buy some assets they will sell if we are really interested in buying them, and we will find the money when we will arrive at the end of our operation in the case of Suez. So yes, we can do that. But this will not be the case for all the assets because some of them are more interesting and some of them are less interesting for us. About the antitrust issues and if we would be stuck with the 29%, first of all, even if the Suez management is completely hostile and we have difficulties to perform our divestment program as we should, you know that antitrust considerations are not done to block any hostile bids. So if, at the end of the day, Suez just on the, say, no position, I think the antitrust body, as it has been the case in the past, will allow us just to divest after the completion of the deal, the global deal, and then we'll be able to divest, for example, the French Water business some weeks after the completion of our deal. So we don't think that the antitrust issues will block this deal because of the hostile position of the target.

In terms of below EBIT improvement, today, Suez is working hard to improve the tax rate. You know that their tax rate is quite high. And as we have said a little bit earlier, of course, the combination of the 2 groups and the deferred tax assets that we have, both in the U.S. for more than $400 million and in France for more than EUR 400 million, will help streamline a lot the tax rate of the combined entity. So that's an obvious one, which will bring some value to the combined entity.

And I come back a bit on the hostility of the Suez management. You know this project is so exciting that I think that the Suez management will also share with us this value of the project for all their teams. And my feeling is that they will join us in some few days or weeks to share it and to put it in force. So hostility is, for us, not a real option. It is clearly an inclusive proposal for both types of employees, of Veolia and of Suez, and this is also the case for the management. For the ecological transformation, the room is so large, and there is so many things to do that there is a place, a good place, an enthusiastic place for everybody. So this -- and there is also -- one question, the last question perhaps, please. It will be the last one.

Perfect. The last question comes from [ Thomas Petrovich ], [ Good Life ].

Just a last question, I'll let you go. What would happen in theoretical situation, which we had already between Fortum and Uniper, when you're going to have an activist hedge fund on board that would prevent company takeover, you won't be able to consolidate the assets? What's your strategy then?

Excuse me, I'm not sure to have really understood your question. Could you repeat it slowly, please, because the line was...

Sure, of course. So obviously, let's say, ENGIE agrees and sells you the 29.9%, and then you launch a tender offer for Suez shares. If there are few activist hedge funds that would build a stake in Suez and then prevent you from taking over the company or want a very high price for you to do it, what happens in the situation when you cannot close the deal and extract all the synergies? What's your strategy then?

Yes. So what -- so in terms of strategy for -- you're talking about the tender offer in -- for the tender offer, if we are above 66.7%, we will be able to merge the 2 companies and then to extract the synergies of the total -- of the combined entity. So that's real -- for us, it's not too much an issue. And because -- by combining the 2 entities, when we are above 66.7%, we'll be able to get all the synergies done. The question is about [ the squeeze out ]. Yes. Thank you very much to everybody. Have a very good day. And of course, our IR team is ready for answering all other questions you could have. Goodbye.

Thank you. Ladies and gentlemen, this concludes today's webcast. Thank you all for attending. You may now disconnect.