Veolia plans to make big acquisitions next year

PARIS: French water and waste group Veolia said it would target bigger acquisitions next year as it focuses on high-growth activities such as toxic waste treatment and plastics recycling.

The utility said it had agreed to sell its district heating business in the United States to infrastructure fund Antin for $1.25 billion, which CEO Antoine Frerot said would free up cash to reinvest.

Veolia’s revenue from plastics recycling jumped 30% in the first half and will bring in 400 million to 450 million euros (about $470 million) this year, up from just 50 million euros a few years ago, and could top 1 billion euros by 2025, it said.

Asset rotation and focusing on growth could help Veolia keep activist investors at bay. Smaller peer Suez is under pressure from activist fund Amber to do exactly that.

Frerot said on an analysts call he would present a new 2020-23 strategy in February.

While in recent years acquisitions typically cost 10 million to 100 million euros, under the new plan they will be in the range of 100 million-500 million euros, Frerot said.

He said Veolia was selling its US heating business because it is a mature and capital-intensive asset, but that does not mean Veolia will exit this activity elsewhere.

Veolia’s core earnings rose 5.4% to 2 billion euros as revenue rose 5.8% to 13.32 billion. Frerot confirmed guidance for 2019 core earnings of 3.9 billion to 4.0 billion and said growth had picked up in the second quarter, with core earnings up 7.3% ater growing 3.8% in the first quarter. ↑