French Government Cuts Stake in Renault

The French government will raise about 1.3 billion euros from selling part of its holding in Renault in a move seen boosting long term sentiment in shares of the French carmaker.

Bankers handling the sale said the French government would sell about 8.5 percent of Europe's fourth biggest automaker through the open market. After the placement and a subsequent offering to employees, the French state will own about 15 percent of Renault's capital.

The move was viewed positively by equity analysts as it will boost Renault's freefloat and thus make it more liquid. The French government, which appeared to time the sale to take advantage of a recent rally in Renault's share price, said it would retain its current stake for now.

"We intend to keep our 15 percent stake in the short to medium term. We think the state's holding will contribute to the stability of the Renault shares," said a spokesman for the Economics and Finance Ministry.

At 1013 GMT, Renault shares were trading one percent lower at 49.31 euros on pressure from the placement, against a slightly higher autos sector. But dealers said the books were covered, meaning the bankers had found buyers for all the shares.

Long Term Gain

Analysts were upbeat about the longer-term effects.

"It is very good news. The government has lifted the lid on the stock which means it will be able to reach its potential," said Patrice Solaro, auto analyst at Julius Baer.

"The share had risked being capped at about 50 euros but now it has upside to around 60 euros," he added.

Renault is banking on new models including its new Megane and Scenic minivan to boost operating profits in the next year or so and several analysts see momentum shifting to Renault's favour from previous sector favourite and domestic rival PSA Peugeot-Citroen.

Renault's stock has risen over 30 percent in the last two months, outperforming the auto sector and PSA's shares.

Renault last week saw its operating profit sink by over a third in the first half although its bottom line, or net profit, jumped 32 percent, boosted by a generous contribution from its Japanese partner Nissan.

JP Morgan is acting as the global coordinator of the sale of 24.2 million shares, alongside Societe Generale and Deutsche Bank, which are the bookrunners.

JP Morgan said in a statement the shares were being offered to institutional investors outside the United States at a price between 48.65 and 49.15 euros per share in an accelerated bookbuild.

An accelerated bookbuild is a swift auction of shares among professional investors orchestrated by an investment bank. Pricing is usually decided at the end of the auction. The offering size may be increased by another 2.4 million shares if demand is strong.