• French state owns 50.63 percent of the airports operator
  • The 2016 budget targets raising 5 billion euros in stake sales

France is considering cutting its stake in Aeroports de Paris to below 50 percent to raise funds as it seeks to bolster troubled nuclear reactor builder Areva SA, people familiar with the plan said.

The government, which oversees the Agence des Participations de l’Etat, or APE -- the state shareholding agency that owns 50.63 percent of Aeroports de Paris -- is studying the divestment of a stake in the operator of Paris’s two main airports, the people said, asking not to be named since the plan isn’t public. The state has overcome its long-held reluctance to relinquish its controlling stake in a company it considers strategic, one of the people said.

In France’s 2016 budget law, the government has targeted raising about 5 billion euros ($5.7 billion) through stake sales. The government has earmarked 2 billion euros of that to cut debt, with the rest for industrial projects. Areva will feature prominently among the recipients, Finance Minister Michel Sapin said in an interview on Oct. 5.

Areva said in July it will need to raise 3.4 billion euros, mostly through a capital increase, to reduce its debt. The company posted a record 4.8 billion-euro loss last year as it took new charges for cost overruns at nuclear plant projects in France and Finland, and separate renewable energy projects. It also had to write down assets amid slowing demand for nuclear fuel and services in countries including Japan and Germany in the wake of the Fukushima accident in 2011.

For France, cutting the state’s stake in ADP below 50 percent would require the passing of a bill by both houses of parliament. If the government becomes a minority shareholder in the company, it can create a golden share to give it a decisive say over what it sees as a strategic asset.

Investor Day

The state’s mulling of the ADP stake sale comes as the company prepares to unveil to investors Monday its 2016-2020 strategic plan.

Other major ADP shareholders include Vinci SA, with an 8 percent stake, Schiphol Group, with 8 percent, and Predica, with 4.8 percent. One of the people said both Vinci, which raised its stake in ADP in 2013 from 3.3 percent, and Predica, a Paris-based investment fund, would be interested in increasing their holdings in the company.

ADP and the state agency APE declined to comment on a possible sale. A spokesman for Vinci wouldn’t comment on the company’s potential interest in raising its stake in ADP. A spokeswoman for the French economy minister didn’t have immediate comments.

ADP has a market capitalization of about 10.7 billion euros. The French state has already trimmed its stake in ADP a few times since 2008. The most recent sale occurred in 2013 when about 1.5 million shares - or roughly 1.5 percent of the company’s outstanding shares - were sold at a volume-weighted average price of 65.04 euros, data compiled by Bloomberg shows.

Richly Valued

Since then, the stock has climbed about 70 percent. The shares traded 0.9 percent lower at 108.50 euros as of 12:16 p.m. on Monday. The stock is up 8.2 percent in 2015, just shy of France’s broad SBF 120 index’s 9 percent gain.

Despite recent market volatility, the timing for selling shares in ADP seems attractive. The stock trades at rich valuation levels: 21.8 times earnings expected in the next 12 months. That’s above the 17.3 times for German rival Fraport AG and well above 14.8 times for the SBF 120 index. The stock also trades at 2.7 times book value, while both Fraport and the SBF 120 index trade at 1.6 time book value.

Airports have become prized assets as infrastructure and pension funds seek long-term investments amid low interest rates, sending prices soaring. That helped the Dow Jones Brookfield Airports Infrastructure Index more than double in the past 5 years, compared to a 31 percent gain in the MSCI World Index. 

Few Options

President Francois Hollande has few financial options to help Areva. He can’t dig into the state’s coffers after he pledged to cut the deficit to 3.3 percent of gross domestic product in 2016 from 3.8 this year. State spending must drop to 55.1 percent of GDP next year, down from 55.8 percent this year, Sapin said as he unveiled the 2016 budget law.

The French state has already opened tenders for the sale of the two regional airports of Nice and Lyon. APE is selling 60 percent of the airports and keeping the remaining share in its unlisted portfolio. Nice-Cote d’Azur airport, the third-busiest in France, according to its website, could be valued at about 2 billion euros. Both sales will be completed in the first quarter of next year, according to APE. ADP has said it’s interested in a stake in the Nice airport. The state sold a stake in the Toulouse airport last year, and now holds only 10 percent of the operator.

APE has stakes in 77 companies, of which 13 are listed entities. Other potential stakes that France could divest include telephone carrier Orange SA and Thales SA. The state could also sell some shares in Safran SA after a divestment of a 3.96 percent stake last March.

Economy Minister Emmanuel Macron has said the state plans to reduce its 19.74 percent stake in Renault SA to its early 2015 level of 15.1 percent. Yet the divestment may not happen soon. In April the government bought 4.64 percent in Renault to secure double voting rights. The purchase was made when the stock was close to its highest this year at around 90 euros per share. Renault traded at 76.32 euros on Monday.

A shareholding agreement is keeping PSA Peugeot Citroen out of divestment plans. Along with Chinese partner Dongfeng Motor Corp. and the Peugeot family, the state has a pact under which each of three owns about 14 percent of the shares. France and Germany also each have a 12 percent stake in plane maker Airbus SA.

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