Veolia Sets Turnaround Goals With Huge Asset Sales (VE)

Veolia Environnement SA (NYSE: VIE) may be the world’s largest water utility, but the global volatility and being based in Europe have taken a toll on the company’s shareholders.  The company has announced that it will sell roughly 5 billion Euros worth of assets in order to help the company reduce its debt obligations.  The move will raise the equivalent of $6.7 billion and will represent an exit of its mass transit business.

The remaining Veolia will focus on water assets, as well as energy and waste. The company also plans to sell its British regulated water assets and will sell the United States operations focused on solid waste operations.  Its Transdev transport business is also up for grabs.

The title of this story hints at a dividend, which would be in excess of 10% now in ADR terms for U.S. investors.  The stock has lost so much value that it is an accidentally high dividend and it stood out like a sore thumb (red flag) last night in one of our dividend screens.  In response to this, it appears as though the company is going to lower its dividend.

As far as how this $6.7 billion compares to the company, the current ADR market capitalization is listed as $6.44 billion.  That figure is a bit misleading though.  At the end of 2010 it had the equivalent of $7.3 billion in cash and equivalents and another $1.42 billion in long-term investments.  Unfortunately, it also had more than $24.2 billion in long-term debt.  Total equity was over $10.6 billion at the end of 2010, but taking out goodwill and intangibles generates a -$6 billion deficiency in net tangible assets.

The company’s CEO is giving itself two-years to engineer a turnaround. ADRs closed Monday at $12.75 and the 52-week trading range is $10.89 to $33.86.  It is highly unusual for a company of this sort to face such a sell-off but global woes, the Euro-Zone woes, and earnings warnings have hurt the company and its shareholders.