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German Gov’t Selling Off Lufthansa

October 12, 1997

FRANKFURT, Germany (AP) _ Seeking to raise much-needed cash, the German government will float its remaining minority stake in Lufthansa airlines Monday at 33.30 marks ($19) a share _ 50 pfennig under the stock’s closing price last week.

The government expects to raise almost 5 billion marks by selling its 37.45 percent stake of the German flag carrier.

Transport Minister Matthias Wissmann called the price ``extremely fair″ and said it showed the government’s desire to attract long-term investors.

He pointed to the ``enormous interest″ in the sale, which was oversubscribed, as evidence that investors recognize Lufthansa’s successes and have confidence in its future.

``The success of the placement is not least also a success for the federal government and its privatization policy,″ he said.

However, analysts say demand for Lufthansa shares has come mainly from private investors, with institutional participants sidelined. Private investors get a discount of 1 mark per share.

Lufthansa shares have soared nearly 70 percent this year, but analysts say that dazzling performance is unlikely to be sustained despite recent assertions by Lufthansa officials and the lead managers of the issue that the stock is around 40 percent undervalued.

``The company itself is in good shape, but there simply isn’t much room for gains,″ said Michael Klein, analyst at Delbrueck and Co. in Frankfurt.

Lufthansa must ensure that a majority of the company remains in German hands to guarantee landing rights at other European airports as a German airline, he noted.

Retail buyers are being strongly encouraged to participate in the flotation because they’re likely to be German and are known to hold their shares longer than institutional investors, analysts say.

In August, Lufthansa posted its best-ever pretax profit for a first half: Earnings more than tripled to 397 million marks ($227 million). The company also said it expects full-year net profit to be ``well above″ last year’s 558 million marks.

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