The French government has announced it will offload up to $7 billion worth of shares in France Telecom SA, as France prepares to sell state assets in order to reduce its colossal national debt.
According to the finance ministry, the French government will sell as many as 299 million shares to institutional investors, or up to 12.1% of its current France Telecom stake. After the sale, the French government’s stake in the former monopoly will fall from 54.5%, to between 41% and 43.5%.
The sale should raise between 4.6 billion euros ($5.6 billion) to 5.8 billion euros ($7.06 billion), based on Tuesday’s closing price. The government is offering the shares at 18.95 euros ($23.08) to 19.25 euros ($23.45) each, said people familiar with the sale.
On the New York Stock Exchange the carrier’s shares fell 1.3% to $23.29, as of 5pm GMT, Wednesday.
France Telecom will also sell convertible bonds worth as much as 1.15 billion euros ($1.4 billion) to improve its balance sheet, the statement said.
France is looking to use the money it raises from the sale to help reduce the French state’s national debt burden, which has repeatedly breached European Union limits. The public debt mountain is currently standing at a trillion euros, or 1,000 billion euros ($1,218 billion)
The sale of state assets is part of the plan by the finance minister, Nicolas Sarkozy, to lower France’s national debt, that has reached a record 63.7% of gross domestic product. At the moment, the European Union’s debt limit is 60% of GDP, although there are proposals in the offing to ease these rules.
Sarkozy is popular member of the French government, and is widely expected to resign in the coming weeks to take over the chairmanship of the governing party UMP. There is talk that he has set his sights on succeeding Jacques Chirac as president.
Sarkozy’s plan to use the money to cut government debt is not universally shared in the government, with some figures wanting the money for new social spending plans.
France is following other European countries opting for asset sales to help reduce the state debt. There are planned share offerings for the power company Electricite de France, the German telecom carrier Deutsche Telekom AG, and Italy’s Enel SpA (the country’s largest utility).
In June the French government sold 35% of Snecma SA, the state-owned maker of aircraft engines, raising 1.15 billion euros ($1.4 billion).