By Yann Le Guernigou
PARIS (Reuters) - Societe Generale
The one-for-four rights issue at 47.50 euros per share offers a discount of 38.9 percent to Friday's closing price.
"The price is very low. The feedback from the market cannot have been very encouraging. As they can't miss this deal they decided to strike very low," said Landsbanki Kepler banking analyst Pierre Flabbee.
Fund managers contacted by Reuters last week had been looking for a discount of up to 30 percent.
The bank's shares fell 3 percent to 75.40 euros by 1156 GMT with France's benchmark CAC 40 index <.FCHI> down 0.5 percent.
SocGen revealed plans to tap investors on January 24 when it stunned the financial world with 4.9 billion euros of rogue trading losses blamed on a single trader.
The trader, Jerome Kerviel, was jailed on Friday. A French broker who was quizzed by police for 48 hours over his links with Kerviel was released by judges without charge on Saturday.
LIFELINE
The bank received a lifeline from two U.S. banks in the shape of guarantees underwriting the offer.
"The price is a big surprise. It's obviously meant to avoid the underwriting banks getting stuck with shares. In any event it contributed to market weakness this morning," said David Thebault, head of derivative sales at Paris brokers Global Equities.
SocGen's cash call is designed also to mop up writedowns from the U.S. sub-prime crisis totaling 2.6 billion euros, including 400 million penciled in but not previously allocated.
A senior SocGen official said the discount was designed to guarantee that the rights issue would be a success against the background of the current volatility in global markets.
"It's a very, very low price. We were not expecting such a discount. It reflects the lack of demand in the market," said one Paris-based share dealer at a foreign bank.
The discount compares with 15.5 percent offered by rival BNP Paribas
BNP is seen as a potential predator for SocGen, which it failed to buy in a three-way takeover battle in 1999.
French newsletter Lettre de l'Expansion reported that BNP Paribas's top management was split over whether to launch an offer for SocGen worth 93 euros. The bank declined comment.
Based on Friday's closing price of 77.72 euros, the combination of old and new shares implies a theoretical market value of 71.68 euros per SocGen share. This values each right attached to an old share at 6.04 euros.
Allowing for a 2007 dividend of 0.9 euro, which SocGen says it will pay to holders of existing shares, the theoretical price equates to 70.96 euros, valuing each right at 5.86 euros.
Shareholders can opt to avoid dilution by exchanging the rights attached to four old shares for one new share, and paying 47.5 euros in cash, or sell the rights on the market.
The offer will run from February 21 to February 29.
JPMorgan
WRITEDOWN
SocGen said the share issue will boost its Tier One capital adequacy ratio to 8 percent from 6.8 percent at end-2007.
The bank also set targets for 2008-10 which are close to its current goals, with a return on equity of 19-20 percent compared with around 20 percent now.
The bank boosted its earlier provisional forecast for 2007 profits, saying it expected net income of 947 million euros. On January 24 it had forecast net profit of 600 to 800 million euros.
With takeover speculation swirling around the bank since it announced the heavy trading losses, SocGen said it would stick by its strategy of driving growth through foreign retail banking, specialist financial services and private banking.
Executive Chairman Daniel Bouton insists the strategy is sound and has said the bank can remain independent.
(Additional reporting by Nick Antonovics, Tim Hepher, Marcel Michelson, Blaise Robinson, Sitamaran Shankar, Nicolas Rialan; Editing by Louise Ireland)
