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Place your bets

21 November 2019 By Christopher Thompson

There are some benefits to having a former investment banker as president. Shares in La Française des Jeux rose by up to 18% on their debut after the government-controlled national lottery made its stock market debut in a listing championed by Emmanuel Macron, the ex-Rothschild banker who now occupies the Elysee Palace. But resurgent protests and a national strike will make it harder for him to flog other state assets in the coming year.

The biggest French retail stock offering since the global financial crisis was a success for around 500,000 domestic punters who saw their cut-price shares jump by almost a fifth. The state and its advisers, however, will face charges of underpricing the country’s showpiece privatisation by leaving around 600 million euros of value on the table.

In truth, the FDJ soufflé may yet deflate. A market capitalisation of around 4.3 billion euros means the company trades at a heady 22 times expected earnings for next year. That’s a hefty premium to Greek peer Greek Organisation of Football Prognostics, which is valued on a multiple of 15 despite higher expected sales growth, according to Refinitiv data.

The successful initial public offering should whet investors’ appetite for the sale of other French assets, much as the British government offloaded telecom and gas holdings in the 1980s. Top of the list is the government’s 51% stake in Aeroports de Paris, which Macron wants to use to start an innovation fund. Shares in the 18 billion euro manager of the Charles de Gaulle and Orly airports have crept back up after suffering a selloff in May, when France’s constitutional court approved plans for opposition politicians to ballot for a referendum on the idea.

Yet hostility to privatisations has hardly gone away. Parisian bankers speak of the “social issues” overshadowing a sale of ADP, including a national strike planned for December. One of the likely beneficiaries of a selloff is Vinci, the French infrastructure company which already owns 8% of ADP and would probably buy more. The operator of French highway toll booths is a frequent target of “gilets jaunes” protestors.

The ADP ballot is well short of the threshold needed to force a national vote on the issue. And Macron can point to a fruitful lottery IPO. But French bankers hoping their former colleague will push more lucrative business their way may be disappointed.

(This is a Breakingviews prediction for 2020. To see more of our predictions, click here.)


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