By Geert De Clercq
PARIS (Reuters) - French waste and water group Suez (PA:SEVI) and Canadian fund Caisse de dépôt et placement du Québec (CDPQ) will buy GE Water from General Electric (N:GE) for an enterprise value of 3.2 billion euros (2.77 billion pounds),Suez said in a statement.
In an all-cash deal, Suez and CDPQ will buy 100 percent of GE Water through a 70/30 joint venture, to which Suez will contribute its existing industrial water activities. The new business will operate under the Suez brand.
Chief executive officer Jean-Louis Chaussade told reporters the industrial water market is more important than Suez's traditional municipal water markets because industry accounts for 15 to 20 percent of global water consumption compared to just 5 to 8 percent for human consumption in cities.
The industrial water market is worth about 95 billion euros globally and grows by about 5 percent per year, he said.
"This is a strategic acquisition for Suez," Chaussade said.
Suez said it had fully underwritten bridge financing in place for the transaction, and is considering refinancing it through a capital increase of about 750 million euros.
It said its main shareholders, Engie (PA:ENGIE), CriteriaCaixa and Caltagirone Group have confirmed their intention to participate in the capital increase for their pro rata share.
Lead shareholder Engie said in a separate statement it would subscribe to the capital increase to the full extent of its 32.6 percent stake in Suez at a cost of about 240 million euros.
Suez will also issue a 1.1 billion euro long-term senior bond and 600 million worth of hybrid bonds. CDPQ will contribute 700 million euros of equity to the venture.
The new business unit will have revenue of about 2 billion euros, compared to Suez's current 15 billion euros, and will employ 10,000 people, of which 7,500 will come from GE Water.
Chaussade said Suez expects 200 million euros worth of revenue synergies per year in the group's water business, but had not included possible synergies between its water and waste business.
"Cross-selling between our water and waste units will be reinforced, as clients increasingly want environment services that include water and waste treatment," he said.
($1 = 0.9483 euros)