Goods inspection SGS confirms merger talks with Bureau Veritas
The goods inspection group SGS is in talks with its French competitor Bureau Veritas about a possible merger. This would bring together the two largest companies in the industry worldwide. It would be the biggest deal the industry has ever seen.
15.01.2025, 06:57
15.01.2025, 09:03
SDA
According to the news agency Bloomberg, the deal could be announced in the coming weeks. It cited a person familiar with the matter. The Bloomberg report from Tuesday evening went on to say that talks are at an advanced stage but could be delayed or fail.
Both SGS and Bureau Veritas confirmed the talks on Wednesday. However, there was no guarantee that they would lead to a transaction or similar agreement, they said. Neither company would comment further on the matter.
New mega group
In one fell swoop, a player of unprecedented proportions would emerge in the goods testing and inspection industry. The current number 1 and number 2 in the industry would have a combined annual turnover of a good 12 billion Swiss francs. The combined market share would be around 15 percent and the combined market capitalization just under 35 billion.
SGS has a slight overweight. The Geneva-based group generated sales of CHF 6.6 billion in 2023 (8% market share), while Bureau Veritas had sales of CHF 5.9 billion (7%).
But does the mega-group make any sense at all? There are at least doubts among analysts. Given the size and complexity of a merger, the risks could outweigh the benefits, according to a commentary by British bank Barclays.
Numerous difficulties
Berenberg also paints a rather negative picture. From the shareholders' point of view, there is a lot to be said for the merger. There would also be a certain synergy potential. Costs could be saved and additional turnover could be generated in some areas.
At the same time, however, there are also numerous difficulties in terms of market share, overlaps and focus. The analyst responsible fears a loss of sales with important customers. He also has doubts as to whether the two companies fit together culturally, strategically and administratively.
There are also antitrust issues in various end markets and regions. The deal also depends on the approval of Wendel SE, which is Bureau Veritas' largest shareholder with a 26.5 percent stake, and probably also on the approval of the French government, according to Barclays.
Ego problems
It is also too early for Bank Vontobel to say whether a deal will ultimately be reached. However, the two companies have been keeping an eye on each other for several years. It is probably the third or fourth time that talks have been held, says the Vontobel expert responsible, but the first time that they have been made public.
However, the talks have always failed due to the egos of both parties. These include the question of the headquarters, which Bureau Veritas would like to see in Paris, and the question of who will appoint the Chairman of the Board of Directors and who will appoint the CEO.
All in all, there are still some unanswered questions that need to be clarified before a deal can actually be made. The fact that investors are rather skeptical about the merger is also shown by the pre-market performance of SGS shares. The shares of the Geneva-based group are trading around 1 percent lower before the official trading day.
