SGS, Bureau Veritas in Talks for $33 Billion Combination

(Bloomberg) — SGS SA is in talks to combine with Bureau Veritas SA in a deal that would create one of the world’s largest testing and certification companies, with a combined market value of more than $33 billion.

Geneva-based SGS and France’s Bureau Veritas are in discussions regarding a potential combination, the companies said in separate statements on Wednesday, adding there can be no assurance that the talks will result in a transaction or other agreement. Bloomberg News first reported Tuesday that the companies were in talks for a tie-up.

A potential combination of the two companies would signal intensifying consolidation in the industrial testing, inspection and certification sector that’s globally valued at more than $230 billion by MarketsandMarkets, and is growing amid increased regulations for environmental and other standards. 

Any deal between the two companies will be an all-stock transaction, people familiar with the matter said. 

Shares of SGS fell 4.2% early Wednesday in Zurich, with Bureau Veritas up 3.5% in Paris. Through Tuesday, SGS had risen more than a quarter over the last 12 months, giving the company a market value of 17.6 billion Swiss francs ($19.2 billion). Bureau Veritas was up by a similar amount over the period for a market capitalization of €13.5 billion ($13.9 billion).

The potential deal is being largely driven by the main shareholders of the two companies. European investment firm Groupe Bruxelles Lambert SA, which owns over 19% in SGS, and Wendel SE, the largest investor in Bureau Veritas, have been holding talks for several months, according to the people, who declined to be identified since the matter is not public. Wendel holds a 26.5% stake in Bureau Veritas, Bloomberg-compiled data show. 

GBL was largely built by deceased Belgian billionaire Albert Frere, who turned his family’s nail and chain business into an empire stretching from energy to alcohol. He was behind some mega European cross-border mergers, including the combination of Lafarge SA and Holcim Ltd in 2014 to create the world’s biggest cement company.

In France, any potential SGS-Bureau Veritas deal would also likely need to be vetted by the French government. The Lac1 fund, managed by state-owned Bpifrance, last year bought a 4% holding in Bureau Veritas. Bpifrance has been involved in the talks and signaled it is open to the transaction, the people said.

Wendel, GBL and Bpifrance didn’t immediately respond to requests for comment.

Established in 1828, Neuilly-sur-Seine-based Bureau Veritas specializes in laboratory testing, inspection and certification services. It has a presence in 140 countries and about 83,000 employees globally, according to its website. In December, the company replaced Vivendi SE in France’s blue-chip CAC 40 index after the media conglomerate split into four separate entities.

SGS, founded as a grain inspection house in 1878 in France, operates 2,600 offices and laboratories with almost 100,000 employees around the world, serving clients in diverse industries.

Speculation over the years of the two companies combining had been shrugged off by SGS, which said in 2007 that regulators would “probably judge a merger between Bureau Veritas and SGS could create dominant positions in certain markets, particularly industrial testing.”

Under its new chief executive officer, Geraldine Picaud, who took charge last year, SGS has undertaken an aggressive acquisition strategy. As of November, the Swiss firm had made 10 purchases in 2024. 

“It’s effectively one a month since I took over,” Picaud said in an interview that month. “We are going to continue on that path.” 

The testing, inspection and certification sector is fragmented, counting other players like Trojan Technologies Inc., Dekra Testing and Certification SA and Intertek Group Plc. Picaud noted in the interview that not a single player in the industry accounts for more than 5% of the total market.

“I need to participate actively in consolidation,” she said at that time.

Bureau Veritas and SGS’s potential combination would create a company that could cut costs and chalk up productivity gains and economies of scale, according to Bloomberg Intelligence, which sees synergies to shareholders that may conceivably exceed €250 million.

 

–With assistance from Paula Doenecke, Claudia Cohen and Jan-Henrik Förster.

(Updates with context throughout)

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