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France may sell parts of state-backed companies

BY GERALDINE AMIEL AND SAM SCHECHNER

PARIS -- The French government is considering selling portions of state-backed companies to help improve its finances, as the crisis in the euro zone' s second-largest economy deepens, according to government officials.

The socialist government of President Francois Hollande, which has already said it can' t meet budget-deficit targets it promised its European peers last year, is exploring how it could sell off slices of companies without sacrificing the measure of control that government ownership helps it retain.

"As part of the budget restructuring, and the modernization of our public policy, we are indeed thinking about changing our ownership stakes," France' s industry minister Arnaud Montebourg said in an interview. "We' re not ruling out that kind of move, but we do not want to lose our means of influence over companies."

Any stake sales would come as the government struggles to rein in a fast-increasing debt load with an economy that has been stagnating for over a year. Mr. Hollande has raised taxes and pledged to cut spending, but still has little room for maneuver as he seeks to balance the country' s budget by 2017.

The French state directly and indirectly owns controlling stakes in stakes in several companies, such as nuclear-engineering group Areva, and has significant minority shares of companies including France Telecom, airline Air France-KLM and car maker Renault.

Mr. Montebourg declined to say which companies might come up for sale, but another government official said that selling some of the country' s 85% stake in energy behemoth Electricite de France SA (EDF.FR) would be "the obvious choice."

France' s national debt grew 6.8% to $2.37 trillion in 2012, or more than 90% of the country' s GDP. In the 2013 budget, the government forecasts that it will spend around EUR48.8 billion servicing its debt.

EDF' s shares have gained around 12% since the start of the year, and France can lower its stake to 70% under existing law. Reducing its stake down to 70% would garner about $5.5 billion based on EDF' s current share price.

An EDF spokeswoman declined to comment.

France' s ownership stakes are a legacy of the country' s dirigiste past, in which the company nationalized companies, allowing it to control most major industries and run public monopolies.

Since the start of the 1990s, successive French governments engaged in massive privatizations, but retained control over what were deemed "strategic assets" such as energy companies.

Selling part of the family silver has already been done by France' s previous government, under President Nicolas Sarkozy, who divested 3% of EDF in late 2007 to help finance a fund for universities.

But later, because of the financial crisis stemming from the U.S. subprime crisis, followed by the euro-zone crisis, the value of the stakes nose-dived, making the government all the more reluctant to sell any shares.

Late last month, France raised about $580.5 million from the sale of 3.12% of the capital of defense-equipment maker Safran, bringing the French state' s stake down to roughly 27%. The government said it planned to invest the proceeds elsewhere in the economy, rather than directly pay down the debt or plug holes in its finances.

France also cut its voting stake in Airbus owner European Aeronautic Defence & Space Co. to 12% from 15% as part of an agreement with the German government. The country, at least initially, has parked those shares in a nonvoting trust, rather than selling them.

Dow Jones Newswires

 

04/05/2013

 

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