SocGen rights issue seen no deterrent to predators

PARIS (Reuters) - A deeply discounted $8 billion rights issue from Societe Generale (SOGN.PA), 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), 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.

SocGen shares rose 3.5 percent to 77.16 euros on Tuesday, giving the bank a stock market value of around 36 billion euros. BNP's market value is about 55 billion euros, after a 3.7 percent rise in its share price on Tuesday.

INDEPENDENCE?

Most market speculation has centered on a fresh approach by BNP for its cross-town rival, which BNP failed to buy in 1999.

On Monday, a source familiar with BNP's thinking said it would not make a hostile bid for SocGen but could be interested in a friendly deal.

A second source familiar with the matter said that BNP is set to wait at least until SocGen's rights issue is complete and its dividend is set rather than making a decision during the offering on whether to try starting talks.

SocGen Executive Chairman and Chief Executive Daniel Bouton reiterated in newspaper interviews on Tuesday that the bank could stay independent.

"I continue to think that our business plan, our dynamism and thus the valuation of the bank constitute our best defense," he told French newspaper Le Monde.

And Citigroup said it was unlikely that SocGen would get a takeover offer soon, keeping its "sell" rating on SocGen shares.

"In the absence of a near-term cash offer for the group, we believe SG will continue to struggle as the stock comes to terms with a deeply discounted rights issue, an impaired franchise and challenging market conditions," it said.

Citigroup cut its price target on SocGen to 62 euros from 65 euros. Lehman trimmed its price target by 1 euro to 94 euros and kept an "underweight" rating on SocGen shares.

Investment bank UBS, which raised its rating on Societe Generale (SOGN.PA) to "buy" from "neutral", said a BNP Paribas bid was possible, but not in the near term.

Dresdner added that BNP could offer 100 euros a share for SocGen.

"Even though SocGen has a few poison pills, SocGen may not be able to fight off an attractive bid," Dresdner said.

(Additional reporting by Reuters Bangalore and Mathieu Robbins; Editing by David Cowell)