SGS Ends $30 Billion Merger Talks with Bureau Veritas Over Agreement Issues

Swiss testing and inspection giant SGS has announced the termination of merger discussions with French competitor Bureau Veritas, citing a failure to reach an agreement. The proposed $30 billion deal, which could have reshaped the product testing and certification industry, will not move forward, SGS revealed in a statement on Monday.

“SGS and Bureau Veritas have been exploring a potential combination. The discussions have not resulted in an agreement and have ended,” SGS stated briefly. According to Reuters, the announcement follows weeks of speculation about the potential all-stock transaction that would have seen SGS listed in Paris.

The news sent SGS shares up as much as 7% during early trading before the gains moderated, while Bureau Veritas saw its shares fall by up to 3.8%. SGS declined to provide further details, with a spokesperson stating the company had “nothing to add at present about the reasons for its decision.”

Contractual Issues and Execution Risks

According to a source familiar with the situation, minor contractual disagreements and concerns over execution risks were significant factors in the collapse of the talks. Per Reuters, these obstacles ultimately outweighed the potential benefits of the deal for both sides.

The proposed merger would have combined two of the world’s largest players in testing, inspection, and certification services. While discussions were ongoing, it was reported earlier this month that the transaction would involve SGS shares being traded in Paris. This aspect of the deal was complicated by regulatory measures enacted in 2019 during a Swiss-EU dispute over stock market equivalence. At the time, Switzerland imposed protective measures barring the listing of Swiss shares on EU exchanges after the bloc withdrew recognition of the Swiss exchange.

Swiss financial authorities, while not commenting on the specifics of the SGS-Bureau Veritas negotiations, acknowledged the potential regulatory hurdles such measures could pose. Steps were reportedly underway to resolve the issue, though the source indicated that these concerns were not a major factor in the decision to end merger discussions.

Industry Impact

The termination of talks underscores the challenges faced in navigating complex cross-border mergers, particularly in industries subject to regulatory and geopolitical constraints. SGS and Bureau Veritas, which test and certify products, ingredients, and processes across various sectors, are likely to continue pursuing growth opportunities independently.

Source: Reuters