SocGen Seeks Cash to Shore Up FinancesBy Reuters - | Posted 2008-02-11 Email Print
Societe Generale launched a deeply discounted 5.5 billion euros ($8 billion) capital increase to prop up its finances and heal scars from the world's biggest rogue trading scandal.
PARIS (Reuters) - Societe Generale launched a deeply discounted 5.5 billion euros ($8 billion) capital increase on Monday to prop up its finances and heal scars from the world's biggest rogue trading scandal.
The one-for-four rights issue at 47.50 euros per share gives its existing shareholders a bigger-than-expected discount of 38.9 percent to Friday's price as a reward for sticking with the bank and filling a 4.9 billion euro hole blamed on one trader.
Investors and analysts, who had predicted a discount of 30 percent, said SocGen appeared anxious to guarantee a maneuver that could be crucial to its hopes of staying independent.
"The price is very low. The feedback from the market cannot have been very encouraging. As they can't miss this deal they decided to strike very low," said Landsbanki Kepler banking analyst Pierre Flabbee.
Takeover talk has swirled around SocGen since January 24 when executive chairman Daniel Bouton unveiled the multi-billion-euro trading losses and pinned the blame on unauthorized stock market gambling by one junior trader, 31-year-old Jerome Kerviel.
Kerviel spent the weekend in a Paris prison after prosecutors succeeded in overturning his bail. But a Paris broker who was quizzed by police for 48 hours over his links with Kerviel was released by judges without charge on Saturday.
Top contender to bid for SocGen is domestic rival BNP Paribas. But a source familiar with BNP's thinking told Reuters on Monday it was not preparing a hostile bid. BNP failed to buy SocGen in a three-way takeover battle in 1999.
"The idea of a bid has not been raised at all at board level," the source said. "What one could think about is a friendly approach. If at a certain stage Societe Generale management considers it intelligent to bolster the bank with a natural partner there could be something to do."
SocGen shares fell on news of the rights issue, which increases the number of shares in the bank by a quarter, extending losses after the remarks from the source, who asked not to be identified.
The bank's shares fell 3.9 percent to 74.69 euros by 1418 GMT with France's benchmark CAC 40 index up 0.2 percent.
"I think this takes away a degree of the speculative premium that had built up. It probably reduces the chances of an imminent takeover. I think the market got carried away that this was going to be a takeover candidate," Rupert Morrell, senior fund manager at Premier Asset Management, said of the cash call.
SocGen revealed the size of the capital increase, but not its price, when it disclosed the trading losses.