European Business News (EBN), 97-09-08

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated Mon, September 08 6:40 PM CET

CONTENTS

[01] Paris to sell nearly 40% of France Telecom, including stake for Deutsche Telekom

[02] Bertelsmann/AOL venture to operate CompuServe Europe

[03] Tele Danmark to buy back $2 billion in stock from government

[04] UK industrial production rises 0.6%; manufacturing output gains 0.4%

[05] Porsche says its 1997 profits have more than doubled

[06] Air France board member quits over Blanc departure

[07] Dresdner to merge mortgage units by year end

[08] Blue Circle profit jumps 22%

[09] Preussag worldwide sales rise 2.2% to $9.7 billion

[10] Endesa claims control of Enersis

[11] Corporate and Economic Briefs

[01] Paris to sell nearly 40% of France Telecom, including stake for Deutsche Telekom

Strauss-Kahn, speaking at a press conference, said the state would retain 62% to 63% of France Telecom, in keeping with the Socialist-led government's policy of generally opposing privatisation's - in which the government would lose majority control of publicly held companies.

The bulk of the minority share placement will be offered to institutional and individual investors, who will get about 20% of the company, Strauss- Kahn said. Employees will be offered about 4%, and Deutsche Telekom will be offered 7% to 8% of the company.

The balance, about 6%, is to be reserved for other international telecoms groups.

France Telecom shares will begin trading on October 20, Strauss-Kahn said, with firm orders to be accepted from October 6.

On Friday, Michel Delebarre, a French government advisor appointed to examine the future of France Telecom, presented his report to Jospin in which he recommended selling one-third of the telecoms operator. In July, the government named Delebarre to examine options for France Telecom, with his report due at the latest Sept. 5.

During the Spring legislative election campaign, Jospin waffled on the France Telecom issue, first saying he would cancel the share placement, then implying he would allow it to go ahead after consultation with France Telecom employees, then later again implying the IPO may not be allowed.

In his general policy speech, however, Prime Minister Lionel Jospin added that 'we know that adaptations will be necessary to keep our rankings among the most developed nations in the world and come closer to other European partners.'

Under the previous government, France Telecom's IPO had been scheduled for May 1997.

Strauss-Kahn added that while 'the value of (France Telecom) shares has not yet been defined, estimates show that 1% of France Telecom is worth about' 2 billion French francs ($333 million).

That would give a total value of FF74 billion to FF76 billion for the 37% to 38% of the company to be sold.

But some analysts said they expect France Telecom shares to trade at a significant discount to net asset value, which means the monies raised by the French government from the placement would be significantly below the figure put forward by Strauss-Kahn.

Strauss-Kahn also ruled out a New York stock quotation for France Telecom.

In addition to the share placement, Strauss-Kahn announced there would be a capital increase for the company of 5% to 6%. The capital increase is then to be used as the portion of the company to go to other international groups.

In his report, Delebarre had also recommended such a capital increase.

Strauss-Kahn also said Deutsche Telekom would give some of its capital to France Telecom in exchange for what it received.

'It could be about 7.5%,' Strauss-Kahn said when asked how much of Deutsche Telekom's capital France Telecom would receive in creating the cross- shareholding between the two companies.

[02] Bertelsmann/AOL venture to operate CompuServe Europe

'The acquisition of CompuServe's interactive services will help fuel our global expansion -- especially in the critical European marketplace, which we believe is poised for tremendous growth,' AOL chairman Steve Case said in a statement issued by Bertelsmann.

In a complex deal, U.S. finance group H&R Block's said it would sell its 80% stake in CompuServe to telecommunications group WorldCom in a stock transaction valued at $1.2 billion.

CompuServe and America Online have a combined total of 14 million Online subscribers world-wide.

Bertelsmann said AOL would gain around 2.6 million CompuServe customers through the deal.

Of this total, the AOL-Bertelsmann venture in Europe would have 1.5 million customers, equal in size to Europe's biggest Internet service company, Deutsche Telekom's T-Online.

Bernd Schiphorst, director of Bertelsmann's multimedia activities, said at a news conference in Hamburg that German publisher Axel Springer Verlag could also take a stake in CompuServe Germany. Springer already has a 10 percent stake in AOL Bertelsmann.

[03] Tele Danmark to buy back $2 billion in stock from government

'The government has discussed the subject with Tele Danmark and they have together agreed on proceeding with a 14 billion crown buyback of A shares from the kingdom,' the Finance Ministry said.

The buyback -- to be at market price on the day of purchase minus 2% -- covers more than half of the state's present holding. The statement added that the transfer, subject to approval by shareholders and parliament, should take place during the first half of 1998.

'It has furthermore been agreed that the kingdom's remaining shares are not to be sold until after the buyback. The government will be exploring in detail the options available,' it said.

The Danish telecommunications company said that the deal between its board and the government was conditional on there being a majority for it in parliament and approval from the group's shareholders.

The Danish state said earlier this year that it planned to sell part of its stake. In the government's 1998 draft budget, released in August, the finance ministry also stated it expected to raise about 15 billion kroner through the sale of state assets, including some Tele Danmark shares.

Analysts have been predicting for some months that Tele Danmark would use the opportunity to reduce its large cash holding by buying some of the shares.

Tele Danmark said it intends to finance the purchase by a write down of equity capital and by increasing borrowing.

As a result of the proposed share repurchase, Tele Danmark expects its debt burden, calculated as net debt in relation to the sum of equity capital and net debt, to be about 45% compared with minus 6% at present.

'The group's domestic and international growth strategy will continue under the new capital structure,' Tele Danmark said.

[04] UK industrial production rises 0.6%; manufacturing output gains 0.4%

But with the economy still running above trend, most commentators anticipate a 0.25-percentage-point rise in the central bank's official lending rate to 7.25% by year end.

UK industrial production rose 0.6% on the month in July and 2.3% on the year, the Office for National Statistics said. Manufacturing output climbed 0.4% from June and was up 1.6% from July 1996.

Economists surveyed by Dow Jones had expected zero monthly growth in industrial production and expansion of 0.3% in manufacturing output.

Industrial output rose 1.0% from the previous quarter in the three months through July, while manufacturing output was unchanged. The industrial- production data are highly volatile, and three-month numbers are considered a better guide to trends than the monthly figures.

Output of durable goods fell 0.5% in the latest three-months period from the previous three months, while production of non-durables fell 0.9%. Production of investment goods rose 0.6%, and output of intermediate goods rose 2.0%.

'Manufacturing output shows that this sector is still holding up despite the negative impact of sterling's strength,' said Phil Shaw, economist at Investec Bank.

Meanwhile, the ONS said the producer output price index rose 0.1% on the month in August before seasonal adjustment, slowing from 0.2% growth in July. The index was up 1.4% on the year, unchanged from July.

The adjusted core output price index - which excludes food, beverages, tobacco and petroleum - rose 0.1% on the month in August and 0.7% on the year. It had been forecast to remain unchanged on the month.

Producer input prices rose 0.6% on the month in August after seasonal adjustment and fell 7.9% on the year, compared with respective 0.4% and 8.9% declines in July.

Economists surveyed by Dow Jones turned in median forecasts for a 0.1% monthly rise in unadjusted output prices and 0.3% growth in input prices after seasonal adjustment.

The ONS said the rise in input prices reflected higher costs for crude oil and imported metals.

'The rise in input costs is symptomatic of the decline of sterling, while the output side seems to have reached the trough of factory gate inflation, ' DKB's Stamenkovic said. 'Unless sterling declines sharply to threaten the benign inflationary picture, it is difficult to see strong output prices given competitive forces in manufacturing and the heeling-back of overseas demand.'

Investec Bank's Shaw said he expects the official lending rate to hit 7.25% by year end. 'I am sceptical that we are at the end of the current rate cycle, though we shall have to wait for retail-price inflation to see what's happening to the service sector,' he said.

[05] Porsche says its 1997 profits have more than doubled

Group sales during the period rose a preliminary 43% to 4.0 billion marks, up from 2.8 billion marks last year. Deliveries rose 68% to 32,300 units.

For the year ending July 31, 1998, Porsche is expecting deliveries to rise to at least 38,000 units and group sales to increase to 4.5 billion marks.

Wendelin Wiedeking, Porsche chairman, attributed the strong results largely to the popularity of its new Boxster model.

'We thank above all the Boxster as the new second model, but also strong, unbroken demand for the 911.'

Porsche said it expected to sell at least 38,000 units in the 1997/98 business year as Boxster production starts at the Valmet Automotive plant in Finland and as Porsche launches a new 911 model.

The company said turnover climbed to four billion marks last year, incorporating a boost of 300 million marks from the consolidation of its U.S. and Spanish units.

Porsche, which makes only two models, the Boxster and 911, has been producing at full capacity at its Stuttgart plant and did not indicate if it would take further steps to increase its production potential.

[06] Air France board member quits over Blanc departure

In a statement, Marc Ladreit de Lacharriere, head of French holding company Fimalac, said he sent a letter on Friday to Transport Minister Jean-Claude Gayssot asking that his mandate not be renewed.

He added that his decision was a sign of complete support for Blanc and a protest against the government's refusal to end majority state control of Air France. Ladreit de Lacharriere is chairman of the Fimalac investment company.

'This decision takes note of the brutal break in the recovery strategy conducted by Christian Blanc, namely the government's choice to oppose the company's privatisation,' the statement said.

Blanc said on Friday that he would be leaving Air France when directors are re-appointed in early October and that he felt forced out by the government's refusal to press ahead with a speedy privatisation, which he deemed vital for the airline's development.

Communist Transport Minister Jean-Claude Gayssot and Socialist Prime Minister Lionel Jospin overruled Blanc over the privatisation, which was a condition of approval by the European Commission for a 20-billion franc ($3.3 billion) cash injection. The government is prepared to sell up to 49% of the airline's capital.

Ladreit de Lacharriere is regarded as one of France's most dynamic entrepreneurs. His Fimalac group owns the IBCA debt rating agency, which recently made a bid for US agency Fitch Investors Service LP.

[07] Dresdner to merge mortgage units by year end

The merger, viewed by analysts as a logical way of eliminating fragmentation, will fuse Deutsche Hypothekenbank Frankfurt with Dresdner's two north German units -- Hypothekenbank in Hamburg and Norddeutsche Hypotheken- und Wechselbank.

The units will merge on the basis of their end-1997 balance sheets, Dresdner said in a brief statement. The merger will take effect on January 1, 1998.

'The fusion of the institutions should strengthen their competitive position, particularly in the light of the realisation of European economic and monetary union, and further improve their earnings power by using cost synergies,' the bank said.

The decision to fuse the units marks the latest in a series of moves toward consolidation in the overcrowded and cost-laden German market for financial services.

Commerzbank banking analyst Dieter Hein said Dresdner's move appeared sensible.

'It makes more sense to have one mortgage bank in the group rather than three separate units,' he said.

Hein also views the move as being connected with the plans announced this summer to merge Bavarian mortgage specialists Bayerische Vereinsbank and Bayerische Hypotheken- und Wechsel-Bank to create Germany's second-largest commercial bank. The German cartel office approved the Bavarian merger on Friday. (Reuters)

[08] Blue Circle profit jumps 22%

The UK cement company said its first half pretax profit rose to £141.9 million, before a £25 million charge, from £116.3 million a year earlier.

The profit at St. Marys helped lift earnings at the company's heavy building materials unit to £120.9 million, up 18% over the previous year.

Blue Circle said its heating division also outperformed despite 'generally unfavourable market conditions,' doubling earnings to £18 million from £9 million in the year-earlier half.

Looking ahead, Blue Circle said demand for its UK cement products has fallen from its strong levels earlier in the year, but is still expected to be higher in the full year. Demand in the US and Canada are expected to remain strong. In the heating division, restructuring benefits will be less noticeable in the second half.

'However, the benefits of the introduction of new products and market initiatives are expected to continue,' the company said. 'The seasonal demand for the group's heating products is again likely to occur in the second half.'

[09] Preussag worldwide sales rise 2.2% to $9.7 billion

The year-earlier figure is adjusted to account for deconsolidations.

In the third quarter alone, sales were 6.2 billion marks ,without providing a year-earlier figure.

Preussag added that order inflows continue to be favorable this year, reaching 20.2 billion marks during the first three quarters of 1997, 'maintaining the level of the year-earlier period.'

[10] Endesa claims control of Enersis

Spain's 67%-state-owned electrical utility, made a $1.5 billion offer in August for the five investment companies that together own 29% of Enersis. But a higher-priced counteroffer for one of the investment companies by its minority shareholders initially threatened to undermine Endesa's takeover plans.

Shareholders of the one investment company, Luz, tendered only 21.63% of the total outstanding, short of the 50.1% needed to make the offer automatically be declared a success. But Endesa said it was able to acquire a stake of between 84% and 94% in each of the other four companies.

'In the end, the tender offer proved to be more successful than we had hoped, and we haven't had to modify a single aspect of our offer,' said Rafael Miranda, Endesa's chief executive officer, in an interview. 'Enersis is the most important bet that Endesa has made in its international expansion.'

The linkup will give the two companies a combined presence in 16 Latin American countries and access to 18 million clients.

[11] Corporate and Economic Briefs

The sale of a 23.8% stake in T.I. Telefonica International, or TISA, to Telefonica was approved said a spokesman for the Spanish state industrial holding company. Telefonica had an agreement with in which Telefonica had the option to buy TISA's shares until March 31, 1998. The price of the buy- option was 127bn pesetas ($829.2m) and the acquisition means Telefonica will control 100% of TISA, said the spokesman.

Danisco said that it now owns or has purchase pledges for 88.6% of the share capital in UK food flavorings company Borthwicks. Danisco has already purchased 24.8% of Borthwicks share capital and has irrevocable promises from the shareholders owning another 63.8%. Last month, Danisco offered to buy all of Borthwicks share capital at a price of 63 pence a share. The offer was supported by Borthwicks management.

British Telecom said it will cut the cost of domestic calls made during weekend evenings and nights by 10% and daytime calls made by cellular phone by 12% from Oct. 1. The latest regulated price cut will reduce the cost of evening and night time calls to 4.2 pence a minute from 4.7 pence. That will bring the total reduction in tariffs on evening and night calls to 28% this year. BT also said it will cut the cost of daytime calls made by Cellnet and Vodafone Group cellular phones by 12% to 32 pence a minute from 36.5 pence, reflecting a reduction in payment BT makes to the two mobile phone operators. BT said residential customers were likely to benefit the most from the lower evening and night time call rates, although businesses operating outside normal working hours would also be affected.

Czech consumer prices rose 0.7% in August from July and 9.9% from August 1996, the Czech Statistical Office reported. Prices in the 12 months through August were up 7.9% from the 12 months through August 1996, the CSU said.

Italy's retail sales index rose 2.8% in June from June 1996 compared with a 2.6%-rise on the year in May, the national statistics bureau Istat said. Istat said sales at large distribution chains rose 5.2% while sales at medium- and small-sized retailers grew by 2.3% in June on the year. Meanwhile, sales at medium- and small-sized firms grew 2.3% in June on the year, while sales at large firms grew 4.2%. Istat said retail sales rose by 2.1% in the first six months compared with the same period in 1996. Istat noted there was a slow but constant recovery in retail sales figures.

French import-export agency Coface could post a surplus in its accounts for the government of over 6 billion French francs ($983.6 million) in 1997, the company's chairman said. In a question-and-answer interview in the French business daily Les Echos, Coface Chairman Francois David said, 'The surplus for the State account...could be more than 6 billion francs , depending on the effect of the real rhythm of payments received, that is, repayment by debtor countries.' Coface, which is a unit of Assurances Generales de France, acts as the state agency guaranteeing import-export credits.

Troubled state-controlled bank Credit Lyonnais said it had sold its Banque Chalus unit to Credit Agricole Centre France. A spokesman for Credit Lyonnais declined to give the sale price of the unit. In 1996, Banque Chalus, which has 21 branches, posted net banking income of 93 million French francs ($15.2 million). Credit Lyonnais had held 100% of Chalus since 1972. The Credit Lyonnais spokesman added that while the bank did realize a capital gain on the sale, 'it was very marginal'.

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