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Privatisations The French and the Swedish perspectives Sharing experiences …

Privatisations The French and the Swedish perspectives Sharing experiences …. Stockholm Thursday, March 29 2007. Proposed Agenda. Privatisations in France in a historical perspective Privatisation routes applied by the French government Role of Investment Banks

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Privatisations The French and the Swedish perspectives Sharing experiences …

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  1. Privatisations The French and the Swedish perspectivesSharing experiences … Stockholm Thursday, March 29 2007

  2. Proposed Agenda • Privatisations in France in a historical perspective • Privatisation routes applied by the French government • Role of Investment Banks • Some examples of recent French privatisations

  3. Privatisations in France – Historical perspective • Build-up of portfolio of public companies • Nationalisations in the 1930’s, in 1944-46 and in the early 1980’s • Creation of government controlled companies • Airports, Motorways, Nuclear industry etc. • Launch of privatisation initiative in the mid-1980’s • 1986 – 88: Launch of privatisation process • Saint-Gobain, Alcatel, TFI, Paribas, Suez, Société Générale etc. • 1988 – 93: Some minor privatisations, but programme essentially on hold • Péchiney, AGF, Total etc. • 1993 – 97: Re-launch of privatisation initiative • Rhône-Poulenc, BNP, Renault, Elf Aquitaire, AGF etc. • 1997 – 2002: Selective privatisations • France Telecom, Air France, Aérospatiale, Thales etc. • 2002 onwards • EdF, GdF, Aéroports de Paris, Autoroutes du Sud de la France (ASF) etc. • Around €54bn raised in the market since the beginning of the current programme

  4. The French government has applied different privatisation routes • The stock exchange routes • Stock exchange listing • Sale of shares in companies already listed on the stock exchange • Accelerated bookbuilding • Marketed offerings • The M&A routes • Disposal of stakes in listed companies • Mergers • Full or partial divestments of non-listed companies

  5. Key decision parameters and considerations for the choice of route? • Value considerations • Stock market vs. M&A route (which route would maximise the value for the State?) • Full vs. partial exit - E.g. IPO to obtain market valuation followed by sale of majority shareholding to strategic investor (Motorways’ cases for example ) • Timing: Market conditions at the time the company is ready for privatisation • Industrial considerations • Creation of larger entities better positioned to compete in a global environment • Anti-trust issues • Political considerations • Employment issues • Perception among the public • Process transparency

  6. Role of Investment Banks? • Advisor to the Government • Advisor to the Company • Advisor to Buyers in the context of trade sales • In case of an IPO, the advisory mandate includes: • Structure of the entity to be listed and transfer from a public status to a ”private like status” • Preparation and execution of the market offering (Global coordinator / Bookrunner) • In case of market disposal of stakes in listed companies, the advisory mandate includes: • Evaluation of best timing and market technique (accelerated bookbuilding versus marketed offering for example) • Underwriting • Distribution

  7. Role of Investment Banks – IPO route A 2-stage mission Preparation of the company Preparation of the market offering (IPO workshops) • Selection of advisors (Financial, Legal, Communication, …) • Accounting, Business Plan and Valuation (relation with French CPT committee) • Due Diligence • Documentation and relation with market authorities • Review of corporate organisation to fit with listed companies (corporate governance, …) • Equity story and Capital structure • Communication • Marketing to analysts, investors, retail networks • Roadshow • Timing and offering structure (primary/secondary, retail/institutional, free-float, syndicate structure, employee offering) • Adaptation of regulatory/legal framework (legal status, shareholder agreement, company by laws,…)

  8. The stock exchange route – Some recent examples

  9. Initial Public Offering – EDF (Oct.05, €6.4bn) • More than three years of preliminary work: • Progressive deregulation of the European and French electricity and gas industry • Change of status into “Société Anonyme” (public limited company) • Change of French law to enable opening of capital Preparatory work • IPO by way of a capital increase capped at €7bn • Limited free float (11%) Transaction structure Investment banks involved • French State advisors:Calyon, Morgan Stanley • Company advisors: ABN Amro Rothschild, BNP Paribas, Citigroup • Bookrunners (institutional offering): AAR, BNPP, Calyon, MS • Bookrunners (retail offering): BNPP, Calyon • With a total final market offer of €6.4bn including greenshoe, EDF was the largest IPO in Europe since 1999. Overall demand was high: • Retail demand reached 4.9 million individuals and was 1.6x oversubscribed • Institutional tranche was 5x oversubscribed • Allocation of 66% of the final offering to retail • Since the IPO, share price performed extremely well: • EDF share price over-performed CAC 40 by 57.9% (as of March 26 2007) • EDF share price over-performed DJ Stoxx Utilities by 31.9% (as of March 26 2007) Key facts of the transaction

  10. Accelerated Bookbuilding – FT block disposal (June 05, €3.4bn) • This transaction followed a first disposal in September 2004 (following the vote of a law authorizing the French State to decrease its majority stake in France Telecom) • The offering took place rapidly following the expiry day of the lock-up Transaction background Transaction structure • Accelerated bookbuilding with back stop • Offering structure with a minimum size + an extension of 15% + over- allotment of 15% Process • The APE (French government shareholding agency) launched a tender offer on Saturday 4 June with a submission of the proposal due on Sunday before 11.00. • French State announced the disposal early morning on the 6 June Key facts of the transaction • Offer range : €22.5 - 22.85 (-1.6% to -0.1% discount to Friday closing). Final price set at €22.5 • FT share price increased by 1.7% on June 7th on the back of buy-back of short positions and in heavy volumes (around 33 m shares)

  11. The stock exchange route – Key take-aways • Aim at sufficient liquidity at IPO to enable accelerated deals post lock-up, either through a capital increase or a disposal of a block of shares • Involve diversified set of banks at the time of the IPO with strong local commitment and recognised brokerage capabilities to ensure aftermarket performance of the shares • Retail demand is key to secure success, especially for landmark transactions

  12. The M&A route – Some examples • Disposal of stakes in listed companies to industrial purchasers • Sale of a 50.4% stake in ASF to Vinci in 2005 • Sale of a 10.9% stake in Crédit Lyonnais to BNP Paribas in 2002 • Mergers • Merger of DCN with Thales Naval Services (pending) • Merger of Suez with Gaz de France (pending) • Full or partial divestments of non-listed companies • Sale of a 65% stake of SNET (coal thermal plants) in two tranches (2000 and 2004) to Endesa

  13. Privatisation of ASF: an example of value maximisation through a combination of the IPO and M&A routes • March 2002: IPO 49% of ASF, France’s #1 motorways operator • €2.6bn offering @ €25 per share • Institutions (56%), Retail Investors (40%) and Employees (4%) • Key aspects of the transaction : • Legal framework providing stable conditions • ASF leadership position in France and expertise in concessions • Defensive characteristics of Toll Motorways • 2004-05: IPO of remaining French motorways operators • APRR and SANEF • Limitation of the free float (max 30%) to avoid unsolicited shareholders • Opportunity to float motorway companies with a high level of debt

  14. Privatisation of ASF: an example of value maximisation through a combination of the IPO and M&A routes (Cont’d) • July 2005: Divestment of remaining stakes in the 3 French motorways operators • Competitive process attracting numerous bidders • Vinci acquires the Government’s remaining 50.4% stake in ASF • Price: €51 per share vs. €25 at the time of the IPO • Privatisation through an IPO followed by a sale of a block enabled the Government to maximise proceeds • Education of the financial community (financing / valuation) • Pricing reference obtained through stock market rating

  15. Advisor to ADP Privatization of June 2006 Advisor to In its acquisition by Euro 5 933 m March 2006 Advisor to French State Initial Public Offering Euro 6 351 m November 2005 Advisor to French State Merger with Thales Naval Services Pending Advisor to Kingdom of Morocco Disposal of a 80% stake in Euro 1 673 m June 2003 Advisor to ASF Initial Public Offering Euro 2.633m March 2002 Advisor to CDC Disposal of EULIA to Euro 3 100 m July 2004 Advisor to Acquisition of a 16% stake in Euro 1 110 m November 2004 Advisor to French State Initial Public Offering Euro 1.500 m June 2004 Advisor to Charbonnages De France For the disposal of 65% of SNET to (2000 – 2004) Advisor to French State Initial Public Offering Euro 4 006 m June 2005 Involvement of Calyon in selected privatisations(2002 – to date) Advisor to French State Sale of Alcatel’s satellite division to Thales Euro 1 658 m April 2006

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