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French defense IPO soars
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June 4, 1999: 6:31 a.m. ET
Aérospatiale-Matra up 19%, may reshape European aerospace industry
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LONDON (CNNfn) - Shares in Aérospatiale-Matra soared Friday as Europe's second largest aerospace group floated on the Paris bourse for the first time.
Shares in the French-controlled company jumped 18.75 percent from their 19.2 euro issue price to 22.80 euros after massive oversubscription by institutional and retail investors.
Aérospatiale ranks second in Europe behind British Aerospace and number five in the world with 1998 sales of 14.4 billion euros ($14.98 billion). The company's interests include a 34 percent stake in aircraft manufacturer Airbus Industrie and rocket maker Arianespace, as well as strong brands in helicopters and missiles.
The IPO, on the eve of the Paris Air Show, is expected to accelerate the long-awaited restructuring of the European aerospace industry.
The French government floated 17 percent of the company's stock after forming the group earlier this year through a merger with the Matra defense assets of French aerospace group Lagardere.
The state retains 47.7 percent of Aérospatiale with Lagardere taking 33 percent and 2.3 percent held by employees. Lagardere (PMMB) shares dipped 0.81 percent to 36.85 euros.
The float was six times oversubscribed and the government clawed back over 2 million shares from institutions to satisfy demand from over 2.5 million retail investors, higher than demand for French Telecom (PFTE).
The unwillingness of previous French governments to privatize Aérospatiale has been a stumbling block to consolidation of the European aerospace business.
Tom Gallagher, head of global aerospace at CIBC Wood Gundy points out that U.S. consolidation has reduced the key players to just three -- Boeing (BA), Lockheed Martin (LMT) and Raytheon (RTN.A) - while the European defense business still has more than 60 major firms vying for contracts. Gallagher said Europe can expect to see the same level of consolidation as political barriers come down..
The other partners in the Airbus consortium -- British Aerospace (BA.), DaimlerChrysler's Dasa unit and Spain's Casa -- have been frustrated by France in their bid to restructure the consortium into a proper limited company.
One senior BAe executive said the float paved the way for bilateral deals between the companies that could be completed within six months. BAe and Dasa broke off their own merger talks earlier this year.
Aérospatiale-Matra has emerged as the front-runner to take a minority stake in Casa. The Spanish company has a 4 percent stake in Airbus and 10 percent in the pan-European Eurofighter project and has also been in talks with British Aerospace.
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Aérospatiale-Matra
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