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Who will buy 29.9% of Repsol YPF?

November 21, 2008

SAEM – Plans by Lukoil, Russia’s second-largest energy group, to purchase 29.9% of Repsol YPF has raised some concern in Spain. For one, the opposition Popular Party (PP) has vehemently opposed the sale of the national energy major to a Russian company. It is surprising, however, that after the Socialist (PSOE) government and PP jointly announced last week that Russian state-owned energy group Gazprom was not welcome to a slice of Repsol YPF, Prime Minister José Luis Rodríguez Zapatero said that he would not mind if Lukoil became the biggest shareholder in Repsol YPF.

Taking into account constructor Sacyr Vallehermoso´s need to sell its 20.01% interst of Repsol YPF due to a sharp downturn in the Spanish construciton sector, the big question is to whom and at what price.

Some analysts believe that finding the right price for Sacyr Vallehermoso’s insterest in Repsol YPF may be easier said than done. For example, the construction group acquired 20.01% of the Spanish major for €26.71 per share. Taking into account that Repsol YPF shares closed on Friday at €13.91, it means that Lukoil would have to pay a hefty premium to Sacyr Vallehermoso.

La Caixa said it would be ready to sell its 10% stake in Repsol YPF to Lukoil if Sacyr Vallehermoso sold its 20.01% interest. Mutua Madrileña also announced on Friday that it was ready to sell to Lukoil its 2% interest in the energy company.

Another possible obstacle to the deal is that if Lukoil acquired a 30% foothold, it would be entitled to make a 100% bid for Repsol’s shares. This is why some analysts believe that Lukoil may be limited to taking a maximum 29.9% interest in the Spanish major.

Analysts believe that it is very likely that Sacyr Vallehermoso, hard hit by the economic crisis and in particular the downturn in Spain’s construction sector, will sell its share in Repsol YPF. The big question, however, is to whom and at what price.

Other possible suitors that have expressed interest in Sacyr Vallehermoso’s 20.01% of Repsol YPF are Shell, Total, ENI and Gazprom.

(The article can be reprinted as long as permission is requested from etessieri@latamreport.com and the source is mentioned)

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