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Repsol SA Bids For Argentina's YPF Oil

London - April 29 --Spanish oil refiner Repsol disclosed terms Friday for its surprise $13.44 billion unsolicited bid for Argentina's YPF, and said it aims to close the deal by June. Repsol paid the Argentine government $2 billion for a 14.99 percent stake in January, making it the largest shareholder.

The Spanish refiner is offering $44.78 a share cash for the remaining YPF shares, a 25.4 percent premium on the Argentine company's closing price Thursday. Analysts said the price is fair and the deal is very fundable despite the initial stretch it will cause to the Spanish firm's balance sheet. The Spanish company views the deal as a means to accelerate its international expansion. Repsol wants to break way from its reliance on domestic and European markets and leverage its existing presence in Latin America. If its offer is accepted it will merge YPF with its subsidiary Astra, the integrated energy group that has acted as its vehicle for expansion in the region. Astra is listed in Buenos Aires and Zurich.

While analysts praise the strategic fit of the two companies, there are concerns about the reaction of YPF's highly regarded senior management, which had resisted an earlier approach from Repsol. Repsol Chief Executive Alfonso Cortino said the price is not "frivolous," admitting the deal represents "a quantum leap for the company". He expressed hopes that YPF's management team would remain in place. YPF has 15 days to respond to the offer. The bulk of its shares are held by U.S. institutions following an ADR issue in New York. Repsol and YPF, which was privatized in 1993, both dominate their home markets and with strong international operations the enlarged Repsol would have proven petroleum reserves of 4.23 billion barrels and production exceeding 1 million barrels a day. This would put it among the 10 largest oil companies in the world.

While analysts described the price as fair, they said Repsol was prepared to pay at the top end of the range to preempt a rival offer for the well-regarded Argentine firm. However, the move still surprised the markets, which had thought the surge in oil prices would take YPF out of Repsol's reach. "It's definitely what Repsol wanted, as it gives them more upstream potential," said Ranald Wright at Crédit Lyonnais Securities in London. "The only problem we have with the deal is that YPF is very efficient already." Repsol said the deal would generate annual cost savings of $350 million.

Repsol plans to fund the takeover with a $15.5 billion syndicated loan, refinanced with a rights issue of between $4 billion and $6 billion in July. It also will raise another $2.5 billion from asset sales. The company said net debt would climb to $23 billion before dropping below $16 billion by the end of 2000. Analysts also welcomed the strategic fit between the two companies, which they said would provide a balance to Repsol's overexposure in refining and marketing while YPF has focused on exploration and production. "It's all about improving growth prospects and not being left as a domestic Spanish oil company," said one analyst who asked not to be named.

The deal would make the enlarged Repsol a major player in the gas market, ranking number 5 in terms of global reserves. The group said it is targeting double-digit growth in gas sales in the Latin American market. YPF was privatized in 1993 and has established a strong financial profile which has allowed it to borrow on the international capital markets and achieve an A-minus credit rating, better than that of Argentina. Repsol shares opened up 2.1 percent at 15.00 euros in Madrid Thursday before trading was suspended. YPF (YPF) shares closed up 1-3/4 at 35-5/16 in New York trading Thursday.

Repsol's announcement coincided with a round of positive research reports that,. together with rising oil prices, have pushed up oil stocks worldwide. France's Elf Aquitaine (PAQ) jumped 3.85 pence to 44.06 euros while Total (PFP) added 1.9 percent to reach 128.90 euros. BP Amoco (BPA) climbed 1.03 percent to 1,1181 pence in London and Shell (SHEL) added 2.76 percent to hit 474 pence.