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1
Privatisations Privatisations The French and the Swedish perspectivesThe French and the Swedish perspectives
Sharing experiences …Sharing experiences …
Stockholm
Thursday, March 29 2007
2
Proposed AgendaProposed Agenda
Privatisations in France in a historical perspective
Privatisation routes applied by the French government
Role of Investment Banks
Some examples of recent French privatisations
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Privatisations in France – Historical perspective Privatisations in France – Historical perspective
Build-up of portfolio of public companies Nationalisations in the 1930’s, in 1944-46 and in the early 1980’s Creation of government controlled companies
Airports, Motorways, Nuclear industry etc.
Launch of privatisation initiative in the mid-1980’s 1986 – 88: Launch of privatisation process
Saint-Gobain, Alcatel, TFI, Paribas, Suez, Société Générale etc.
1988 – 93: Some minor privatisations, but programme essentially on hold Péchiney, AGF, Total etc.
1993 – 97: Re-launch of privatisation initiative Rhône-Poulenc, BNP, Renault, Elf Aquitaire, AGF etc.
1997 – 2002: Selective privatisations France Telecom, Air France, Aérospatiale, Thales etc.
2002 onwards EdF, GdF, Aéroports de Paris, Autoroutes du Sud de la France (ASF) etc. Around €54bn raised in the market since the beginning of the current programme
4The French government has applied different The French government has applied different privatisation routesprivatisation routes The stock exchange routes
Stock exchange listing
Sale of shares in companies already listed on the stock exchange Accelerated bookbuilding
Marketed offerings
The M&A routes Disposal of stakes in listed companies
Mergers
Full or partial divestments of non-listed companies
5Key decision parameters and considerations Key decision parameters and considerations for the choice of route? for the choice of route? Value considerations
Stock market vs. M&A route (which route would maximise the value for the State?)
Full vs. partial exit - E.g. IPO to obtain market valuation followed by sale of majority shareholding to strategic investor (Motorways’ cases for example )
Timing: Market conditions at the time the company is ready for privatisation
Industrial considerations Creation of larger entities better positioned to compete in a global environment
Anti-trust issues
Political considerations Employment issues
Perception among the public
Process transparency
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Role of Investment Banks?Role of Investment Banks?
Advisor to the Government
Advisor to the Company
Advisor to Buyers in the context of trade sales
In case of an IPO, the advisory mandate includes: Structure of the entity to be listed and transfer from a public status to a ”private like
status”
Preparation and execution of the market offering (Global coordinator / Bookrunner)
In case of market disposal of stakes in listed companies, the advisory mandate includes:
Evaluation of best timing and market technique (accelerated bookbuilding versus marketed offering for example)
Underwriting
Distribution
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Role of Investment Banks – IPO routeRole of Investment Banks – IPO route
A 2-stage mission
Preparation of the company
Preparation of the market offering (IPO workshops)
Accounting, Business Plan and Valuation (relation with French CPT committee)
Equity story and Capital structure
Communication Marketing to analysts,
investors, retail networks
Roadshow
Timing and offering structure (primary/secondary, retail/institutional, free-float, syndicate structure, employee offering)
Due Diligence Documentation and
relation with market authorities
Selection of advisors (Financial, Legal, Communication, …)
Adaptation of regulatory/legal framework (legal status, shareholder agreement, company by laws,…)
Review of corporate organisation to fit with listed companies (corporate governance, …)
8The stock exchange route – Some recent The stock exchange route – Some recent examplesexamples
Initial Public Offerings (IPOs)
Aéroports de Paris, 2006, €1.4bn, Airport
EdF, 2005, €6.3bn, Utilities
Gaz de France, 2005, €4.0bn, Utilities
Sanef, 2005, €0.9bn, Motorways
APRR, 2004, €1.2bn, Motorways
ASF, 2002, €2.5bn, Motorways
Stakes sold through an Accelerated Bookbuilding
France Telecom, 2005, €3.4bn, Telecom
Bull, 2005, €19m, Technology
France Telecom, 2004, €5.1bn, Telecom
Air France, 2004, €0.7bn, Airlines
Thomson, 2003, €0.9bn, Electronics
Dassault Systèmes, 2003, €0.6bn, IT
Stakes sold through a marketed offering
Thomson II, 2000, €2.3bn, Electronics France Telecom II, 1998, €5.5bn, Telecom
9Initial Public Offering – EDF Initial Public Offering – EDF (Oct.05, €6.4bn)(Oct.05, €6.4bn)
Preparatory work
Transaction structure
Investment banks involved
Key facts of the transaction
More than three years of preliminary work: Progressive deregulation of the European and French electricity and gas industry Change of status into “Société Anonyme” (public limited company) Change of French law to enable opening of capital
IPO by way of a capital increase capped at €7bn Limited free float (11%)
French State advisors: Calyon, Morgan Stanley Company advisors: ABN Amro Rothschild, BNP Paribas, Citigroup Bookrunners (institutional offering): AAR, BNPP, Calyon, MS Bookrunners (retail offering): BNPP, Calyon
With a total final market offer of €6.4bn including greenshoe, EDF was the largest IPO in Europe since 1999. Overall demand was high: Retail demand reached 4.9 million individuals and was 1.6x oversubscribed Institutional tranche was 5x oversubscribed Allocation of 66% of the final offering to retail
Since the IPO, share price performed extremely well: EDF share price over-performed CAC 40 by 57.9% (as of March 26 2007) EDF share price over-performed DJ Stoxx Utilities by 31.9% (as of March 26 2007)
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Accelerated Bookbuilding – Accelerated Bookbuilding – FT block disposal FT block disposal (June 05, €3.4bn)(June 05, €3.4bn)
Transaction background
Transaction structure
Process
Key facts of the transaction
This transaction followed a first disposal in September 2004 (following the vote of a law authorizing the French State to decrease its majority stake in France Telecom)
The offering took place rapidly following the expiry day of the lock-up
Accelerated bookbuilding with back stop
Offering structure with a minimum size + an extension of 15% + over- allotment of 15%
The APE (French government shareholding agency) launched a tender offer on Saturday 4 June with a submission of the proposal due on Sunday before 11.00.
French State announced the disposal early morning on the 6 June
Offer range : €22.5 - 22.85 (-1.6% to -0.1% discount to Friday closing). Final price set at €22.5
FT share price increased by 1.7% on June 7th on the back of buy-back of short positions and in heavy volumes (around 33 m shares)
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The stock exchange route – Key take-awaysThe stock exchange route – Key take-aways
Aim at sufficient liquidity at IPO to enable accelerated deals post lock-up, either through a capital increase or a disposal of a block of shares
Involve diversified set of banks at the time of the IPO with strong local commitment and recognised brokerage capabilities to ensure aftermarket performance of the shares
Retail demand is key to secure success, especially for landmark transactions
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The M&A route – Some examplesThe M&A route – Some examples
Disposal of stakes in listed companies to industrial purchasers Sale of a 50.4% stake in ASF to Vinci in 2005
Sale of a 10.9% stake in Crédit Lyonnais to BNP Paribas in 2002
Mergers Merger of DCN with Thales Naval Services (pending)
Merger of Suez with Gaz de France (pending)
Full or partial divestments of non-listed companies Sale of a 65% stake of SNET (coal thermal plants) in two tranches (2000
and 2004) to Endesa
13Privatisation of ASF: Privatisation of ASF: an example of value maximisation through a combination of the an example of value maximisation through a combination of the IPO and M&A routesIPO and M&A routes
March 2002: IPO 49% of ASF, France’s #1 motorways operator €2.6bn offering @ €25 per share
Institutions (56%), Retail Investors (40%) and Employees (4%)
Key aspects of the transaction : Legal framework providing stable conditions
ASF leadership position in France and expertise in concessions
Defensive characteristics of Toll Motorways
2004-05: IPO of remaining French motorways operators APRR and SANEF
Limitation of the free float (max 30%) to avoid unsolicited shareholders
Opportunity to float motorway companies with a high level of debt
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July 2005: Divestment of remaining stakes in the 3 French motorways operators
Competitive process attracting numerous bidders
Vinci acquires the Government’s remaining 50.4% stake in ASF
Price: €51 per share vs. €25 at the time of the IPO
Privatisation through an IPO followed by a sale of a block enabled the Government to maximise proceeds
Education of the financial community (financing / valuation)
Pricing reference obtained through stock market rating
Privatisation of ASF: Privatisation of ASF: an example of value maximisation through a combination of the an example of value maximisation through a combination of the IPO and M&A routes (Cont’d)IPO and M&A routes (Cont’d)
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Advisor to
Charbonnages De France
For the disposal of 65% of
SNET to
(2000 – 2004)
Involvement of Calyon in selected privatisationsInvolvement of Calyon in selected privatisations(2002 – to date)(2002 – to date)
Advisor to
Acquisition of a 16% stake in
Euro 1 110 m
November 2004
Advisor to
French State
Initial Public Offering
Euro 1.500 m
June 2004
Advisor to
ASF
Initial Public Offering
Euro 2.633m
March 2002
Advisor to
Kingdom of Morocco
Disposal of a 80% stake in
Euro 1 673 m
June 2003
Régie des Tabacs
Advisor to
CDC
Disposal of
EULIAto
Euro 3 100 m
July 2004
Advisor to
French State
Initial Public Offering
Euro 6 351 m
November 2005
Advisor to
In its acquisition by
Euro 5 933 m
March 2006
Advisor to
ADP
Privatization of
June 2006
Advisor to
French State
Sale of Alcatel’s satellite division to Thales
Euro 1 658 m
April 2006
Advisor to
French State
Merger with Thales Naval Services
Pending
Advisor to
French State
Initial Public Offering
Euro 4 006 m
June 2005