UPDATE 3-Veolia seeks EU approval to vote at Suez AGM, sources say

(Adds comment from Suez)

BRUSSELS/PARIS, March 26 (Reuters) - French water company Veolia is seeking EU antitrust approval to vote at takeover target Suez’s upcoming shareholder meeting on resolutions that could include deposing Suez board members, two sources close to the matter said.

Veolia also wants to be able to vote on any shareholder resolution to remove a foundation Suez has set up to ringfence its French water operations, forming an obstacle to a takeover, and to oppose Suez asset sales, one of the sources said.

A second source confirmed talks with Brussels were ongoing, adding, however, these only involved broad themes and not detailed resolutions for now.

“It seems obvious there won’t be a deal before an AGM, so Veolia is working on this with the (European) Commission,” the second source said.

Veolia and the Commission declined to comment.

A spokesman for Suez told Reuters the company considered that Veolia would not be able to use its voting rights at the next AGM as Veolia was its main competitor and had not obtained any of the necessary approval from the relevant anti-trust regulators.

Veolia has been locked in a battle for months with water and waste management rival Suez, which opposes its moves to try to take over the company in an increasingly hostile saga.

Veolia is Suez’s top stakeholder with 29.9% and has launched a 11.2-billion-euro ($13.21 billion) bid for the firm, but under EU merger rules it cannot exercise control or influence over its target until the deal is cleared by regulators.

It will require special approval to use its vote to back some resolutions, and has begun talks with Brussels to determine what areas it might be able to vote on, the two sources said.

Suez has yet to call an annual general meeting, though legally it has to take place before the end of June.

It has put forward its own proposals to Veolia, including one scenario involving selling parts of Suez to investment funds Ardian and Global Infrastructure Partners, and it has pushed for a higher bid price.

Suez has also said it wanted to reach a deal with Veolia by next month, and would otherwise press ahead with more potential asset sales, although Veolia has so far rejected all of its moves.

The shareholder meeting could be one way out of an impasse opposing rivals that date back to the 19th century.

Veolia argues it wants to build a stronger global champion with Suez, boosting the groups’ capacity to innovate in services like recycling. Suez has decried the approach, saying it would be detrimental for jobs.

$1 = 0.8481 euros Reporting by Foo Yun Chee and Benjamin Mallet. Writing by Sarah White. Editing by Mark Potter, Paul Simao and Louise Heavens