UPDATE: Saint-Gobain Launches Verallia IPO To Raise Up To EUR958 Million

France's Compagnie de Saint-Gobain SA (SGO.FR) Tuesday launched an initial public offering of its unit Verallia, which manufactures glass bottles and jars, as part of an effort to focus its activities on building materials.

Saint-Gobain plans to raise between EUR785 million and EUR958 million from the spinoff, the company said in a statement. Shares of Verallia will be put on sale at an indicative price of between EUR29.5 and EUR36. Saint-Gobain plans to float a 40% stake in Verallia.

Saint-Gobain said bookbuilding will run from Tuesday until June 20, and pricing will take place June 21. Trading in Verallia shares on NYSE Euronext (NYX) will start June 22.

The parent company had announced the spinoff in October as part of a strategy to focus its activities on building materials. Verallia had become the world's second-largest manufacturer of glass bottles and jars after U.S.-based Owens-Illinois Inc. (O). The company made 25 billion glass containers in 2010 for food and beverage companies and reported net sales of EUR3.6 billion, Saint-Gobain said.

The company has set itself the target of between 3% and 5% organic revenue growth, said Verallia Chief Executive Jerome Fessard, and Verallia will attempt to increase its market share in emerging markets. The company will look at the possibility of "targeted acquisitions" in Latin America in particular, he added.

The company intends to pay out 40% of its net profit in dividends from 2012, he said.

The IPO values Verallia at between EUR1.96 billion and EUR2.4 billion, according to Sven Edelfelt, an analyst with French brokerage Aurel. He said the price is low given the current valuation of Owens-Illinois.

Consequently, the IPO's conditions are attractive for would-be investors, he added in a report.

At 1105 GMT, Saint-Gobain shares traded almost unchanged at EUR44.27 while the benchmark CAC-40 index traded up 0.4%.

Edelfelt recommends buying Saint-Gobain shares as the company will benefit from the Verallia sale and housing construction is rebounding in France.

Verallia's Fessard said the company is determined to complete the initial public offering, even if market conditions are challenging.

"We are confident in the quality of the asset and this asset has shown resilience," he told reporters. "Independent of the environment, this asset remains a quality asset. Today we are determined to complete this process," he added.

BNP Paribas (BNP.FR), JPMorgan Chase & Co. (JPM) and Merrill Lynch are joint lead managers and bookrunners.

-By Inti Landauro and William Horobin, Dow Jones Newswires; +33 1 4017 1740; inti.landauro@dowjones.com

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