Wednesday, February 25, 2004

France plans to sell Snecma by July

Bloomberg News
and The Cincinnati Enquirer

France said Tuesday that it plans to sell part of state-owned airplane and rocket-engine maker Snecma SA in a public offering before July, the first share sale by Prime Minister Jean-Pierre Raffarin's government this year.

CFM International, the joint venture of GE Aircraft Engines and Snecma Moteurs of France, announced Tuesday at the Singapore Air Show that it booked orders last year for 813 engines valued at more than $4.5 billion at list price.

Exclusive engine supplier for newer Boeing 737 jets, CFM is commercial aviation's leading engine supplier with more than 14,000 engines in service.

CFM, which assembles about half its engines in Evendale, also said Druk Air, national carrier of Bhutan, selected its CFM56 engines to power two Airbus A319 jetliners set for delivery late this year.

The government might sell about 30 percent to 40 percent of Snecma on the market, said a person familiar with the matter who declined to be identified. Paris-based Snecma, which had 6.4 billion euros ($8 billion) in sales last year, had been scheduled for a partial sale in 2001. The sale was postponed after the Sept. 11 attacks crippled demand for air travel and new aircraft.

Evendale-based GE Aircraft Engines is a partner with Snecma in CFM International. About a third of Snecma's sales come from its CFMI, the world's biggest maker of engines for large airliners and the sole supplier for Boeing Co.'s 737 model.

In addition, Snecma is a partner in a number of other GEAE programs, including the GE90. To protect that relationship, GE has said it would be willing to buy about a 10 percent stake in Snecma if the stock is offered for sale.

The government in December sold its 21 percent stake in Thomson SA, the world's largest processor of movie film, and in July part of its holding in Renault SA, the country's second-largest carmaker, as it tried to reduce its deficit. A 50 percent increase in equity markets from their seven-year lows in March is reviving investors' appetites for stock sales. Share sales in Europe this year have raised $17.9 billion, compared with $950 million in the same period last year.

"It's a good thing that the state is putting Snecma on the market," said Jacques Tissier, who helps manage the equivalent of $153 million at Stratege SA in Paris. "Snecma will have better access to capital markets and be better able to compete by moving into the private sector."

Snecma chief executive Jean-Paul Bechat said having a chunk of shares owned by public investors would give the company more flexibility and allow it to make acquisitions outside France.

"Snecma has done the maximum possible to consolidate within French borders," Bechat said. "Now with Snecma about to be a quoted company, it will give us the opportunity to team with foreign companies to do maybe mergers, or acquisitions and so on. It will give us better maneuverability."

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