SocGen rights issue seen no deterrent to predators

By Sudip Kar-Gupta

PARIS (Reuters) - A deeply discounted $8 billion rights issue from Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz), seen in part as a bid by the scandal-hit French bank to remain independent, has not convinced analysts that it will deter predators.

SocGen unveiled a one-for-four rights issue at 47.50 euros per share on Monday to shore up its finances after it suffered 4.9 billion euros ($7.1 billion) of losses due to a series of rogue trades the bank blamed on junior trader Jerome Kerviel.

"SocGen has lost the confidence of the market following the trading loss, the deep discount rights issue and a low forecast for CIB (corporate and investment banking) in 2008," Dresdner Kleinwort said in a research note.

Dresdner added that SocGen had become vulnerable to a takeover bid by France's biggest listed bank, BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz), and raised its recommendation on SocGen shares to "buy" from "add", while cutting BNP to "hold" from "add" amid speculation of such a deal.

Analysts said SocGen's cash call, at a 39 percent discount to the shares' market price, was a bid for survival as an independent company.

"Management's presentation had characteristics more of a defense against potential hostile acquirers than a traditional business plan," investment bank Keefe, Bruyette & Woods said.

Lehman Brothers also interpreted the rights issue as a signal by SocGen that it could remain independent, but said it was skeptical.

"The SG (SocGen) standalone scenario is risky for shareholders at the current share price," the investment bank said.