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. Last Updated: 07/27/2016

Germany Starts Sale of Lufthansa Stake

FRANKFURT, Germany -- Germany's second largest share offering kicked off Monday as the sale began of Bonn's remaining 37.5 percent stake in the airline Lufthansa.

"Our Lufthansa is fit. All the indicators, from traffic income to turnover figures are on an upward path," J--rgen Weber, Lufthansa chief executive, told a news conference to launch the subscription period for the shares.

The event marked the start of a road show which will take in financial capitals around the world.

The placement is for up to 143 million shares divided into 130 million shares in the basic transaction and an oversubscription option of 13 million shares.

Based on the current share price, the flotation is expected to be worth around 4.5 billion Deutsche marks ($2.6 billion), not including the oversubscription option.

Weber repeated his forecast that Lufthansa would post record group pretax earnings for 1997, and said shareholders could expect a higher dividend if earnings improved.

Lufthansa posted group pretax profits of 315 million marks in the third quarter of last year.

Over the weekend, Lufthansa's chief financial officer said shares in the company would be more fairly valued at 35 to 50 percent above their current price.

Lufthansa has more than 11 billion marks in hidden reserves and is heading for a record pretax profit of more than 1 billion marks this year, Klaus Schlede told Boersen-Zeitung newspaper in an interview published Saturday.

Schlede said several of the airline's affiliates would be floated on the stock market in the near future, including catering unit LSG Sky Chefs, in a move to realise reserves.

"The Lufthansa share price has growth potential," Schlede said.

The aircraft fleet was worth about 2 billion to 3 billion marks above book value and Lufthansa had an additional 9 billion marks of reserves hidden in its portfolio of subsidiaries and affiliates, he said.

But he stressed that Lufthansa had no plans to sell its stakes. "We will lift the treasures in our stock portfolio, but we will not dispose of them," he said.

He said Lufthansa's share price was fairly valued at 45 to 50 marks from a fundamental point of view. The shares closed electronic trade at 33.40 marks on Friday. "We also expect that current earnings improvements are sustainable," he said.

While group pretax profit would this year exceed 1 billion marks after 686 million marks in 1996, he said net profit would not be significantly above the 558 million marks posted in 1996 because taxes would reach 400 million to 500 million marks.