France Telecom in £3.8bn placing

THE French government privatised telephone giant France Telecom today with a €5.7bn (£3.85bn) surprise placing of up to 12.1% of the company's stock.

The sale of shares in the one-time telecoms monopoly, which owns mobile operator Orange and internet service provider Wanadoo in the UK, will slash the government's stake from 54.5% to about 42.4%.

Rumours of a placing had circulated for months but today's deal by French Finance Minister Nicolas Sarkozy took the markets by surprise.

In a pre-trading statement, Sarkozy said he would sell 235m shares equal to 9.6% of the company's equity at between €18.95 and €19.25 a share, raising €4.5bn . But an over-allocation option could take the total sale to 12.1%, raising €5.7bn in total.

Morgan Stanley, JP Morgan, BNP Paribas and Société Générale were hired as joint book-runners. Simultaneously, France Télécom, headed by restructuring magician Thierry Breton, will sell €1.15bn through a convertible bond issue. Existing shares in France Télécom were today down 40 cents at €19.03.

The share sale completes the privatisation of France Telecom that began six years ago with its flotation through a public offer at €27 a share.

Two years ago, the French government had to rescue the company from the brink of insolvency with a €9bn capital injection after former boss Michel Bon ran up massive debts in an ill-judged acquisitions spree.

But Breton has got the group back on the rails, shedding underperforming subsidiaries and buying in minorities of Orange and internet arm Wanadoo. Last year the company, capitalised at €47.9bn, made net profits of €3.7bn on revenues of €46bn.

A clutch of European governments has been selling off State assets to help cut their debts. France is planning to sell Electricité de France, Germany is selling Deutsche Telekom and Italian utility Enel is expected to be privatised in the coming months.