By Marcel Michelson and Sudip Kar-Gupta
On January 24, SocGen revealed 4.9 billion euros of losses which it said were caused by rogue trades conducted by Jerome Kerviel, a 31-year old trader at the bank.
Analysts say SocGen could attract many possible bidders,
and the takeover speculation on Wednesday focused on a possible
bid by British-based HSBC
"In our view much of the debate on the strategic end-game for SocGen has focused on the need for a French solution to a French problem," said Merrill.
The persistent bid speculation has helped SocGen shares recover since sinking to a 52-week low of 66.80 euros last month. The stock was up 4.1 percent at 82.44 euros in early afternoon trade, valuing SocGen at roughly 39 billion euros.
DISCOUNTED RIGHTS ISSUE SEEN
"This will also enable HSBC to address some of the criticism formulated by KVAM regarding its lack of size in France, its underperforming CIB (corporate and investment banking) and its lack of exposure to growth markets," it said.
SocGen's board is due to meet later on Wednesday and could launch the share rights issue then, a source close to the bank said. The bank is expected to offer a discount of up to 30 percent to push through the deal, traders said.
"The timing is indeed very bad for a capital increase, with markets falling on fears of recession after more weak U.S. data. In this negative macro environment, it won't be easy to raise 5.5 billion," the trader said.
A possible obstacle to a quick capital hike is uncertainty over the bank's financial performance ahead of February 21 results.
AMF chief Michel Prada told Reuters the regulator would study SocGen's capital increase plans closely in coming days.
"People are saying that SocGen on a standalone basis minus the takeover-premium is worth about 70 euros. So a rights issue would have to be below that. The price range being mentioned is quite wide, from 57-70 euros," said Gautier, whose portfolio includes SocGen shares.
BNP Paribas has said it is looking at SocGen while Credit Agricole is also interested and could team up with BNP Paribas to try to break up SocGen, analysts say.
