Great French sell-off lures British

LEADING British companies are eyeing up counterparts in France as the government there launches a breakneck e35bn (£25bn) sale of its stakes in companies to try to contain a ballooning budget deficit.

Telecom, toll road, airport and aerospace interests are all expected to go under the hammer.

Aerospace groups BAE Systems and Rolls-Royce are expected to take a close interest in the reorganisation of the French aerospace and defence industry, while UK airports operator BAA will be closely watching plans to sell Aéroports de Paris, which operates the French capital's Charles de Gaulle and Orly bases.

Further privatisation of the toll-road network may come through an international tender offer, with close interest in State operators from Italian, Spanish and Portuguese rivals.

The urgency of the privatisation programme launched by the right-of-centre government of Prime Minister Jean-Pierre Raffarin was driven home yesterday when the government sold 8.5% of one-time State car company Renault to raise e1.21bn.

After yesterday's selldown, it still has a further 17% of Renault, worth e2.74bn. But the tastiest morsel is the government's 58.89% stake in France Télécom, a holding now worth e28.3bn.

A bill is being rushed through parliament to allow it to sell its interest down below 51%. The government is also planning to offload its 54.4% stake in Air France, worth e1.58bn, to below 20% this autumn. It is also aiming to slash its 41.5% holding in Autoroutes du Sud de la France, capitalised at e6.25bn, and looking at selling other wholly-owned tollroads.

Its 15% stake in continental Europe's biggest defence contractor, Eads, capitalised at e10.5bn, could also be up for grabs.

For Rolls-Royce, the planned sale of Snecma, a jet-engine maker with which it collaborates on a variety of defence and civil jet programmes, will be crucial to the future shape of Europe's aeroengine industry.

But the biggest question marks surround the timing and value of the sale of Aéroports de Paris, whose immense under-exploited retail potential will not have escaped BAA, which operates Britain's premier airports including Heathrow, Gatwick and Stansted.

The move to sell State assets comes as France's budget deficit is forecast to reach 3.7%, busting the limit of 3% of gross domestic product imposed under European Union guidelines.

With an immense shortfall also looming in the State pension fund pot, Raffarin is hastening to raise cash. His goal is shared by Finance Minister Francis Mer, former boss of steel group Usinor, who believes business is best left to the private sector.

The easiest way of raising cash from the 1500 companies still owned or controlled by the French government is to sell stakes in those already quoted.

The CAC 40 share index of France's leading quoted companies has rebounded strongly and State-controlled firms are showing share gains of between 30% and 90% since the start of this year.