France state asset sales begun with Snecma

18th June 2004, Comments 0 comments

PARIS, June 18 (AFP) - The initial public offering of shares in French aircraft engine maker Snecma marks the first step in the government's plans to privatise state-owned companies, which may include the sale of additional France Telecom stock later this year, analysts said Friday.

PARIS, June 18 (AFP) - The initial public offering of shares in French aircraft engine maker Snecma marks the first step in the government's plans to privatise state-owned companies, which may include the sale of additional France Telecom stock later this year, analysts said Friday.

By pursuing the Snecma IPO despite only lacklustre investor demand, Finance Minister Nicolas Sarkozy showed he was more interested in relaunching the privatisation process, rather than securing the highest proceeds from the sale.

"There will be other operations, like France Telecom, Air France - deals where the state has only listed part of its shares on the market," said the managing director of a French brokerage, who requested anonymity.

Snecma shares were priced at EUR 15.60 for retail investors, at the low end of the government's indicative range of between EUR 15.45 and EUR 17.20, and the placement will generate just EUR 1.45 billion (USD 1.76 billion) for the French state, compared with expectations for up to EUR 2 billion.

"This was not a very easy placement," said Emmanuel Ferry, senior economist at Exane BNP Paribas. "That the price was at the low end of the range shows that interest was not very remarkable, particularly from institutional investors."

This was the first IPO of state-owned companies since a stake in Autoroutes du Sud de la France (ASF) was sold by the previous Socialist government in March 2002.

But demand for the ASF issue was much stronger: the placing was 19-times subscribed by institutional investors, while demand for the Snecma shares was just twice the amount offered for sale.

More important for the government, however, was the relatively strong demand from retail investors, who placed 800,000 orders for Snecma shares.

"The government wanted to set an attractive price in order to proceed with other privatisation deals, and restore investor confidence," a Paris trader said after the shares were priced late Thursday.

French investors remain wary of equities following several years of market turmoil that began in 1999, and the government needs to overcome this reluctance in order to succeed with its goal of reducing the state's role in private enterprises.

The state owns nearly EUR 45 billion of stock in companies listed on the French market, and the government has indicated it hopes to raise EUR 4 billion from asset divestments this year.

And Industry Minister Patrick Devedjian reiterated on Tuesday that the government does not intend to keep its majority stake in France Telecom, currently 52.5 percent, and valued at EUR 25 billion.

In a study released earlier this week, Ferry at Exane BNP Paribas said the sale of part of the state's France Telecom shares is "inevitable," if only because the company is one of France's largest, and would easily attract both retail and institutional demand.

More importantly, a series of successful stake sales could bolster public approval for the government's plans to privatise power giant Electricite de France and gas company Gaz de France, which has provoked serious labour union opposition in recent weeks.

The sale of EDF and GDF shares, and also part of the ADP Paris airports operator, is programmed for 2005, and is part of the government's plans for reducing debt levels in line with its obligations under the euro zone's Stability and Growth Pact.

"2004 is a year of transition and preparation" for the projects planned next year, said Exane's Ferry, who expects between EUR 12 and EUR 15 billion of revenues to be raised from privatisations in 2005.

Snecma's shares finished their first day of trading up 0.64 percent at EUR 15.70, while the CAC-40 index closed up 0.61 percent at 3,740.90.

© AFP

Subject: French news

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