SocGen Cap Increase Seen Pricing at Deep Discount

By Nicolas Rialan and Yann Le Guernigou

PARIS (Reuters) - Societe Generale's (SOGN.PA) 5.5 billion euro ($8.1 billion) capital increase to shore up its finances after a massive fraud could be done for as little as 50 euros per share and would be highly dilutive, analysts said.

SocGen shares rose 1.6 percent to 77 euros by 1445 GMT.

The deal -- fully underwritten by JP Morgan (JPM.N) and Morgan Stanley (MS.N) and seen pricing at 50-65 euros per share -- follows Thursday's news that it had suffered an "exceptional" fraud worth $7 billion at the hands of a lone trader in Paris.

The capital increase, which SocGen announced at the same time it revealed the fraud, is expected to take place by Feb. 21, the day the bank publishes its 2007 results, analysts said.

"They need to do this as fast as possible," said one analyst who declined to be named.

The deal would raise France's second-largest listed bank's Tier One ratio, a key gauge of financial strength, to 8.0 percent and would carry preferential subscription rights.

"The price will have to be quite low because it is in Societe Generale's interest that everything goes through smoothly, and JP Morgan and Morgan Stanley haven't agreed to a high level of risk," said the analyst who saw the deal pricing at around 55 euros per share.

Oddo Securities analysts in a note published on Friday said they believed the capital increase would likely be highly dilutive to SocGen stock and the broker downgraded its recommendation on the French bank to "reduce" and trimmed its price target on the stock to 60 euros from 80 euros.

Oddo analysts said they expected the deal to be done at 60 euros per share, a move that would increase SocGen's listed share capital by 20 percent by creating 92 million new shares.

Natixis Securities also saw the new shares priced at 60 euros each, while CMC-CIC Securities said it expected the deal to take place at 60-65 euros per share.

UBS, which lowered its target price for SocGen to 76 euros from 130 euro per share and cut its rating to "neutral" from "buy," said it thought the deal would be 12 percent dilutive.

"One would imagine it will be around 50 euros per share, if not less," said a second analyst who declined to be named, citing volatile global market conditions.

(Editing by Louise Ireland)