UPDATE 1-France's waste and water groups Veolia and Suez approve merger deal

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PARIS, May 14 (Reuters) - Suez said its board and Veolia’s had approved their merger deal, creating a French champion in waste and water management that hopes to take on global rivals emerging in China and profit from economic stimulus programmes.

“This deal is a giant leap for Veolia, the French school of ecological transformation and for the preservation of the environment,” Veolia CEO Antoine Frerot said in a statement released by Suez on Friday.

Veolia sealed a preliminary deal last month to buy most of Suez for nearly 13 billion euros ($15.75 billion) after months of wrangling between the two companies.

The agreement valued Suez at 20.50 euros per share, after Veolia, which already owns 29.9% of its smaller rival, lifted its offer price from 18 euros.

Veolia has long argued that acquiring Suez would help the two maintain an edge on innovations in areas such as recycling, potentially a major source of growth over the next decade.

The group could also benefit as governments around the world pump up infrastructure spending under recovery plans after the COVID-19 pandemic.

Under the deal, some Suez assets, and particularly its French water business, will be spun out into a new entity, in part to overcome anti-trust hurdles as the two groups are leaders in their home market.

Meridiam, GIP and CDC/CNP will be the main shareholders of the “New Suez”, the companies said. Employees will own 3% initially. (Reporting by Michel Rose and Matthieu Protard; Editing by Leslie Adler and David Gregorio)