Bouygues takes $1.9 billion write-down on Alstom stake

Mon Feb 17, 2014 8:18am EST
 
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By Natalie Huet

PARIS (Reuters) - French conglomerate Bouygues BOUY.PA will write down the value of its stake in train and turbine maker Alstom (ALSO.PA: Quote) by 1.4 billion euros ($1.9 billion) to reflect its weaker cash flow forecasts and depressed market value.

The move cuts the stake's value in Bouygues' balance sheet by about 31 percent to 3.08 billion euros. It will appear in fourth-quarter financial statements and will have no impact on Bouygues' cash position or operating performance, the construction-to-telecoms conglomerate said on Monday.

Alstom cut its forecasts for free cash flow and operating profitability last month because of weak orders for power equipment, raising the specter of a dividend cut and sending its shares tumbling.

Bouygues is Alstom's largest shareholder with a 29.4 percent stake. It will release its annual results on February 26.

Shares in Bouygues were down 0.5 percent at 1158 GMT. Alstom was up 0.3 percent, giving it a market value of about 6.5 billion euros. Analyst said a writedown was expected given the slump of more than 37 percent in Alstom's shares in the past 12 months.

Before the writedown, Bouygues valued its 29 percent stake at 4.4 billion euros, or about 67 percent of Alstom's current market capitalization. The writedown brings that to 46 percent.

"It's still a little rich, but I guess they're taking a view that over the longer term cash flow will recover and so will valuation," said Nomura analyst Daniel Cunliffe.

"The real question is whether Bouygues will be happy with a dividend cut, which I think is inevitable, and whether this is a writedown in preparation of a sale."   Continued...

 
The logo of French power and transport engineering company Alstom is pictured on the roof of the company's plant in Reichshoffen near Haguenau, North Eastern France, January 21, 2014. REUTERS/Vincent Kessler