An activist hedge fund has built a position in Suez, as the struggling French water and waste group is poised to take critical decisions about its leadership and strategy.
Amber Capital, a London-based investor, has bought a little over 1 per cent of Suez this year and is now pushing for the company to take decisions on its governance, speed up asset sales and boost shareholder returns.
Suez has been under intense scrutiny following a profit warning in January that sent its shares tumbling 15 per cent in one day. Its shares were up 1.5 per cent on Friday, but remain down 14 per cent so far this year.
“We’d like new management to essentially pay a bit more attention to value creation for shareholders, return on capital employed, and use the opportunity of an ebullient infrastructure market to sell assets and de-lever the company,” Joseph Oughourlian, Amber Capital’s founder, told the Financial Times.
Mr Oughourlian said the investment put the fund in the top 10 of Suez’s shareholders. Suez said it would not comment on changes to its shareholder base outside of its regulatory obligations.
Amber’s investment in Suez comes as the company prepares to replace Jean-Louis Chaussade as chief executive and Gérard Mestrallet as chairman. The duo are due to retire from their roles next summer due to statutory age limits.
Although external candidates are in the running, an internal candidate for chief is considered most probable, according to people familiar with the matter. Jean-Marc Boursier, chief financial officer, and Marie-Ange Debon, the group’s head for France, are favourites for the role.
Mr Chaussade is being considered as chairman but there is a concern among investors that his appointment might not allow for a sufficient break with the past.
The decision on the positions will be determined primarily by its largest shareholder, Engie, which owns one-third of Suez after it was spun out of the energy group in 2008.
More broadly, the market is waiting to hear what Engie plans to do with its stake. A decision on whether it is deemed strategic or might be sold to fund other acquisitions is expected by the end of February when Engie’s chief Isabelle Kocher will unveil her new strategic plan.
“The change of governance will force Engie to build some kind of consensus on Suez in the next year or two . . . Before it weighs in on who should take over, it will have to decide what it wants to do long-term with the company,” said one senior banker in Paris.
Another French dealmaker said that “indecisions over governance are weakening” Suez.
Mr Chaussade’s preference is that Suez remains independent of Engie while other senior figures in the company have said that the two groups now had “different identities” and Suez “hasn’t stood still” having bought GE Water last year.
If Engie chooses to sell, a long-mooted merger with Suez’s French rival Veolia is deemed possible by analysts, including potential disposals needed to avoid regulators blocking the deal.
However, if Engie decides that Suez is strategic it will, according to people briefed on the matter, push for an Engie appointment as chairman. Engie, which has a board meeting next week, declined to comment.