July 22, 2008 / 8:49 AM / 10 years ago

UPDATE 1-Suez Environnement gushes on Paris market debut

PARIS, July 22 (Reuters) - Suez Environnement (SEVI.PA), the water and waste management company spun off by Suez as part of its merger with Gaz de France, jumped almost 40 percent in a falling stock market on its trading debut in Paris on Tuesday.

Suez Environnement shares -- which were given to Suez shareholders and not offered directly to the market -- were 39.4 percent higher at 19.56 euros by 0843 GMT, while the wider European stock market .FTEU3 was down about 1.2 percent.

Suez Environnement will compete with Veolia (VIE.PA), and smaller European players Shanks SKS.L, Lassila & Tikanoja (LAT1V.HE), Severn Trent (SVT.L), United Utilities (UU.L) and Northumbrian Water Group NWG.L. Veolia shares were up 4.8 percent at 34.50 euros.

The start of trading in Suez Environnement and energy company GDF Suez GSZ.PA marks the end of a long-delayed 90 billion euro ($143 billion) merger saga punctuated by bid threats from Italy, a political dispute over privatisation in France, union opposition and bickering over the financial terms.

Paris market operator NYSE Euronext said late on Monday that the reference price of Suez Environnement’s debut was 14 euros per share, which was at the bottom end of a 14-20 euro estimate range given by Suez Environnement head Jean-Louis Chaussade.

“This introduction is a success ... If it had been a real initial public offering, one could have said that we sold the shares at a cheap price, but this is a special situation. We did not sell, we gave away,” said Gerard Mestrallet, the head of GDF Suez, which retains a 35 percent stake in Suez Environnement.

Suez shareholders were given one Suez Environnement share for every four Suez shares they held, a move aimed at slimming down Suez to make possible the merger of equals with Gaz de France.

Mestrallet was talking at a ceremony held at NYSE Euronext’s Paris headquarters for the official start of trading in Suez Environnement shares.

The stock was initially halted limit up for two minutes, indicated 21 percent higher, before trading could start. The halt was greeted by applause from Suez and Euronext officials.

“I think this is a nice recruit for the market,” said Jacques-Antoine Bretteil at fund managers International Capital Gestion, adding that gains were stronger because the stock had been priced at the very lowest end of analysts’ estimates.

“DYNAMITE”

“This is dynamite. I have just loved the story right from the beginning,” said a trader at a foreign bank in Paris.

“All the pressure is a thing of the past and this is going to free the upside. I am very optimistic for the stock.”

Meanwhile, shares of newly merged power and gas giant GDF Suez shed 1 percent to 43.30 euros after touching 42.12 as some investors locked in their profits on Gaz de France and Suez, which have outperformed the market since the start of the year.

“This is a technical fall,” the same trader said.

On Tuesday, Chaussade reiterated hopes to see Suez Environnement being promoted to France's blue-chip CAC .FCHI index as early as September, although several market players said this was unlikely to happen so soon.

“I think there are other candidates so I don’t see the stock being co-opted immediately. That said, it’s all down to the decision of the scientific committee of the (French market watchdog) AMF,” Bretteil said.

Suez Environnement has a 2008 EBITDA objective of 2.10-2.15 billion euros, and with about 489 million shares its market value at 18 euros per share is 8.8 billion euros — half the size of rival Veolia.

The EBITDA to market value multiple of about 4.1 times is well below the range of its rivals at between 7.2 to 9.8. (Additional reporting by Blaise Robinson, Benjamin Mallet and Nathalie Meistermann; Editing by Quentin Bryar)

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