French retail and luxury goods group PPR raised 806 million euros ($1.22 billion) from the oversubscribed listing of its Africa-focused CFAO unit, France's biggest public share offering in two years.

The initial public offering (IPO) comes on the heels of listings of Poland's top utility PGE and Dutch insurer Delta Lloyd DELL.AS.

We are very pleased with the success of the IPO of CFAO. The strong demand for its shares shows investor confidence in the performance and prospects of development of CFAO and in the growth potential of the African continent, said CEO Richard Bielle in a statement.

The CFAO offering, which received offers for 2.5 times the shares available, was priced at 26 euros per share, slightly below the mid-point of an indicated price range of 24.80 to 29 euros. The stock will start trading on Euronext Paris on Thursday.

VOLATILITY RETURNS

Though Europe's IPO market is showing signs of new life, there are still headwinds preventing ambitious pricing, such as rising volatility, as measured by the VIX index .VIX, and reminders in the form of debt problems in Dubai of the risks that equities markets are prone to.

On Monday Danish wind and solar part developer Scan Energy cut the price for its IPO, while last week Danish budget airline Cimber Sterling floated at 10 crowns per share, having previously planned a price range of 20-24 crowns.

People have to set price realistically. Investors know they have a lot to pick and choose from, one London-based banker not involved in the CFAO offering said.

Sanford C. Bernstein analyst Luca Solca said CFAO's pricing partly discounted the fact that African markets were not well known.

PPR is spinning off slightly more than half of the unit, which distributes cars and medicine in Africa, to cut debt and focus on its core consumer and luxury brands, such as Gucci and Yves Saint Laurent.

CFAO's offering size would increase by 15 percent to 926.9 million euros ($1.4 billion) with the exercise of an over-allotment option by bookrunners in the next 30 days.

BNP Paribas, Calyon, Goldman Sachs and Societe Generale are the bookrunners.

I think the market will take this (as) neutral to positive, said John Guy, an analyst with MF Global.

It's positive that PPR has managed to get it away and positive that they might be able to list more, he said.

The deal will be followed by Germany's Hochtief Concessions, which will close on Thursday evening, though the IPO has not yet been covered. German construction group Hochtief aims to raise as much as 1 billion euros in the spin-off.

British fund manager Gartmore and its owners are also raising about 400 million pounds ($663 million) in an IPO to be priced next week.

($1=.6638 Euro)

(Editing by Will Waterman)

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