Credit Lyonnais may become the latest in a series of botched sell-offs, reports Alex Duval Smith from Paris
If rumours are confirmed that the French government is preparing a rush privatisation of the Credit Lyonnais (CL) bank, it will be the latest in a long line of sell-offs motivated more by desperation than design.
The bank — which last month found a buyer for its most attractive asset, the MGM film studios — has failed to pull through after two ill-conceived restructuring plans costing taxpayers up to Fr100- million since last year.
Analysts believe the privatisation plan will see the bank part with between 20 and 25% of its capital by the end of this year — probably to foreign buyers, because the CL’s main competitors, Banque Nationale de Paris and Societe Generale, have shunned all recent approaches.
Faced with losses of Fr3-billion this year and Fr2- billion in 1997, the French government has little choice. A third official restructuring plan would almost certainly be rejected by competition watchdogs in Brussels.
Rumours of the government’s plans for CL surfaced only a week after it decided to sell the Compagnie Generale Maritime (CMG) shipping group, which has absorbed more than Fr4-billion in aid.
While CMG is in worse shape than other recently privatised companies, the right-wing government sorely needs to win over potential investors.
Yet the performance of shares from the 10 privatisations since 1993 has failed to persuade. With the exception of four companies, all shares have declined.
According to one French analyst, successive governments have acted without due reference to the French stock market or even world economic factors. “When you’re planning to sell the world’s fourth largest aluminium group [Pechiney], you look at the state of the aluminium market. When you’re selling the remaining share of Elf, you try to consider general oil market trends.”
But others argue that the governments of Prime Minister Alain Juppe and his predecessor, Edouard Balladur, have had little choice. An analyst said: “The socialists took the best companies in the 1980s and used the proceeds to plug holes in ailing conglomerates.”
It was wrong to compare lacklustre French privatisations with the shareholders’ bonanza that marked late 1980s Britain. “The crazy deregulation that went on in the United Kingdom under Thatcherism, which France is still nowhere near and may never be, created an unbridled buyers’ market.”
France also enjoyed a short-lived boom, according to Guillaume Pensier, a forecaster for the French Finance Ministry. “In 1982, 1,7-million French individuals owned shares. In December 1992, the figure had risen to 4,5-million. But the peak, 6,2- million, was in the first quarter of 1987 and coincided with the privatisation boom.”
>From September 1986 to October 1987, the socialist government privatised 12 companies, including Societe Generale bank and TF1 television.
But one investment adviser, Jean-Jacques Avedissian, said the performance of privatised companies, even including those sold in the late 1980s, had been very uneven.
The industrial sector shows signs of long-term progress. But it also includes some of the worst performances. Renault’s share value since its partial flotation in November 1994 has fallen by 34%.
While the 1993 privatisation list officially stands, dates for sell-offs are being moved further forward.