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Repsol Clinches $13.1B Bid for YPF

June 24, 1999

BUENOS AIRES, Argentina (AP) _ The Spanish oil giant Repsol joined the ranks of the world’s top 10 oil companies on Thursday when it clinched a $13.1 billion takeover bid for Argentina’s YPF.

Repsol said a preliminary count of the all-cash offer showed that stockholders representing more than 83 percent of the company’s shares voted for the deal. That means Repsol will move ahead to take control of YPF, the energy conglomerate that is Argentina’s biggest corporation.

Last January, Repsol bought nearly 15 percent in YPF for $2.01 billion from the Argentine government. With the latest development, it now controls 98.2 percent of YPF.

``This is a historic moment for Repsol. Following the acquisition of YPF, Repsol has made a giant leap forward, becoming a larger, better balanced corporation with an increased growth potential,″ Repsol Chairman Alfonso Cortina said in a statement.

``The high market acceptance of this acquisition has been based on the complementary nature of both companies’ business portfolios,″ added Cortina.

Now that the takeover has succeeded, Repsol will have a number of additional strategic moves to make, according to analysts.

On July 2, Repsol will complete an offering of 240 million new shares, expanding its capital by nearly 27 percent, to finance part of the purchase.

Then there’s management.

Repsol hasn’t said what it will do with Roberto Monti, the talented but occasionally abrasive head of YPF, and his fellow executives.

The YPF executives all backed the Repsol offer, although Monti earlier in the year opposed Repsol’s attempts to change company bylaws to allow Repsol to increase its stake in YPF beyond 15 percent.

Cortina made a vague reference to current management in his statement.

``The new company will need all the management and technical skills offered by both corporations to fulfill the program we have designed for future growth,″ he said.

Analysts emphasized that YPF is already well run and lean.

Repsol will also have to decide whether it’s going to hold onto all 98 percent of YPF, whether it will sell back some on the Buenos Aires stock exchange, whether it will offer its own shares on the Argentine market, or whether it will simply delist YPF.

YPF-Repsol will have about 18 months to meet antitrust conditions laid out by the Argentine government. In addition to YPF, Repsol owns a majority stake in another Argentine energy company, Astra CAPSA.

The government last week said Repsol-YPF will be required to cut its natural gas market share, trim refining capacity and sell off service stations, among other things.

Adding another wrinkle, the Argentine Senate late Wednesday approved an antitrust bill that included three key modifications to an earlier version _ two of which are directly linked to the YPF-Repsol deal. The bill must be passed by the lower Chamber of Deputies before becoming law.

Under the revised bill, any merger creating a company with gross annual sales of $100 million or more would be subject to scrutiny. Thus, the Repsol-YPF merger may be subject to a review, legislative officials said.

``I don’t think the (purchase) process will be reversed,″ said Jose Costa Buck of the Flemings brokerage in Buenos Aires. ``But if the law is approved it could have some say over the divestments.″

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