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Merger of YPF and Repsol

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Added on  2021-04-17

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CORPORATE FINANCE 20 CORPORATE FINANCE Corporate finance Name of the Student Name of the University Author Note Introduction 3 Discussion 3 An analysis of the strategic position of the two companies before the acquisition: 3 The strategic options of the companies before the merger: 4 The purpose for the merger: 5 Worth YPF as an independent company: 6 The potential of YPF after being absorbed by Repsol 7 The reasonable price that Repsol should offer to acquire YPF 8 The Basis of payment

Merger of YPF and Repsol

   Added on 2021-04-17

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Running head: CORPORATE FINANCECorporate financeName of the StudentName of the UniversityAuthor Note
Merger of YPF and Repsol_1
2CORPORATE FINANCETable of ContentsIntroduction......................................................................................................................................3Discussion........................................................................................................................................3An analysis of the strategic position of the two companies before the acquisition:....................3The strategic options of the companies before the merger:.........................................................4The purpose for the merger:........................................................................................................5Worth YPF as an independent company:....................................................................................6The potential of YPF after being absorbed by Repsol.................................................................7The reasonable price that Repsol should offer to acquire YPF...................................................8The Basis of payment for the acquisition....................................................................................8The key factors that might affect the level of success of the proposed acquisition.....................9The threats of the proposed deal................................................................................................10Conclusion.....................................................................................................................................11References......................................................................................................................................12
Merger of YPF and Repsol_2
3CORPORATE FINANCEIntroductionThe discussion deals with the analysis of the merger taken place between two companiesRepsol and YPF. The merger took place in the march 1999 (Coloma 2016) The CEO of Repsoltook over the Argentinean oil company YPF by taking over 100% of its stock. On January of thatyear at a public auction, the Repsol had bought 14.99% of YPF at a price of US$2 billion.According to the transaction, the Repsol had an option buy the rest of the YPF within the nextthree years. The investment of Repsol was more of a financial investment than taking of controlof the business. In order to get the full control Repsol had to take over the rest 85% of the shares(Costamagna et al. 2015). However, there were a number of obstacles that the company had toface. The main obstacle was the Article of Association, which states that any bid that envisagedthe control taking of more that 15% of the company’s stock, should be open to the entirecompanies share and the requirement should be made in cash. This substantially increased thelevel of debt and the company risk. The aim of the Repsol thus, as to swap the shares of YPF inorder to do that the Article of association had to be changed. There was a need for approval fromthe YPF shareholders and need of cash to make the takeover (Fernandez 2015). In the followingthree years, the changes were made and both of the companies were merged successfully. Thefollowing discussion contains the analysis of the acquisition along with the prospects of the deal.Discussion An analysis of the strategic position of the two companies before the acquisition:The company of Repsol was the largest oil company in Spain before the merge with thecompany in 1999 had acquired 60% of the country’s oil refining capacity and 50% of the petrol
Merger of YPF and Repsol_3
4CORPORATE FINANCEstations (Vandenberghe and Casteele 2017). By the end of 1998 with a workforce of 23762employees, Repsol has also dominated Spanish petrochemical industry and had 45% stake in thecountry’s main gas wholesale and retail operations (Barcelona 2017). The Repsol in almost fortyyears became the Spain’s largest company in terms of turnover and profits. After spendingthousand millions of pesetas, the company had created a sound brand image. In 1989, afterfloating to the stock exchange with market capitalization of €721 million, Repsol negotiatedimportant agreements with the foreign petrol companies and Spanish banks. The number ofshares with the US and Japanese banks doubled at that time (Muñiz, Alvídrez and Téllez 2015). On the other hand, the YPF (Direccion Nacional De Yacimientos Petroliferos Fiscales)was formed in the year 1922 when the petrol industry by the argentine government wasnationalized (Velez-Ocampo, Gonzalez-Perez. and Herrera-Cano 2017). By the end of thenineteenth thirties, the company became dominant and contributed 68% of the company’s totaloil production. The dominance increased with time and the market share rose to 84% and thecompany became a gas producer (Olivares 2015).After years of confining its business in Spain, the Repsol in 1996 started to invest outsidethe nation. Their focus was lain America, where the government was facing the major financialproblems with the institutions like World Bank, IMF, IDB (Dunlap et al. 2016). The companyalso expanded in North America, Europe.The strategic options of the companies before the merger:Before the merger of the Respol and YPF, the Respol business was structured into fourmain segments that are refining and marketing, petrochemicals, gas and electricity and E&P. In1997, the company was first merged with Latin America and obtained a set off new objectives
Merger of YPF and Repsol_4

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