Bouygues shares jump on buyback plan

Bouygues shares jump on buyback plan

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PARIS (Global Markets) - French conglomerate Bouygues (BOUY.PA) moved to address the sharp fall in its share price on Wednesday with a planned 1.25 billion euro ($1.81 billion) share buyback program, sending the stock higher.

The telecoms, media and construction group also tweaked its sales target for the year higher after a 4 percent increase in first-half sales as its construction unit returned to growth.

Bouygues shares have fallen around 26 percent in the last three months on concerns about the impact of the global economic slowdown on its construction unit and increasing competition in the mobile telecoms market.

As a result, the company's market capitalization has shrunk to around 8.4 billion euros, below the group's shareholders equity of 9 billion euros at the end of June.

At 1217 GMT, Bouygues was the best-performing stock on the CAC-40 index .FCHI, up 16.87 percent at 26.99 euros.

Bouygues's plan to support its share price and lift earnings per share was seen as a positive signal on the market, sparking hopes of more buybacks by companies, and sending the STOXX construction and materials sector .SXOP up 3.4 percent, strongly outperforming the broad market.

Bouygues' larger rival Vinci (SGEF.PA) and Vivendi (VIV.PA), the telecom and entertainment group, said on Wednesday that they are not planning share buybacks.

The move also signals that Bouygues is set to favor internal growth over acquisitions in the absence of interesting targets, as indicated by Chief Executive Officer Martin Bouygues.

Speaking at a press conference, he ruled out any plans for large mergers or acquisitions, dismissing speculation of possible interest in French cable operator Numericable.

Bouygues' buyback might boost earnings per share by 11 percent if all shareholders take up the offer, which is due to be voted at a meeting on October 10.

The repurchase covers 11.7 percent of the company's capital and will be made at 30 euros per share, representing a premium of 30 percent on the closing price of 23.07 euros on Tuesday, Bouygues said on Wednesday.

Chief Financial Officer Philippe Marien told reporters on a conference call that Bouygues would finance the operation, expected to be a one-off, through its own resources, which total 8 billion euros.

"This proposal benefits all of our shareholders," Martin Bouygues said in a statement. "It is good financial management and does not alter our industrial strategy."

The company also slightly upgraded its sales target for 2011 to 32 billion euros from 31.9 billion as it reported a 27 percent fall in first-half net profit to 391 million euros from 532 million a year earlier.

The decline in net profit, which beat an average of 348 million in a Global Markets poll of four analysts, reflected a lower contribution from Bouygues' 31 percent stake in power and transport engineering company Alstom (ALSO.PA).

The group reported a 4 percent increase in first-half sales to 15.2 billion euros as the construction business returned to growth.

Speaking on the sidelines of the press conference, Martin Bouygues said there could be opportunities for its construction unit in Libya as part of the country's reconstruction after the end of Muammar Gaddafi's 42 year old rule.

($1=.6897 Euro)

(Editing by Helen Massy-Beresford and Jon Loades-Carter)