Shell will pay $4.4 billion in cash and assume $2.3 billion of financial leases and debt to takeover minority stakes in Repsol's Trinidad and Tobago-based Atlantic LNG; Peru LNG; Spain-based power plant Bahia de Bizkaia Electricidad; and LNG sale contracts.
Repsol's credit rating has languished on negative watch at both Moody's Investor Service and Standard & Poor's since the Argentinian government nationalized Repsol affiliate YPF SA operation in May. Repsol's 51% stake in YPF accounted for about 40% of its total Ebitda. The rating agencies also cited fears that Spain's weak sovereign debt rating and economic malaise could hurt the oil company's ability to refinance loans and sell gas in its domestic market.
"With this transaction, Repsol has in a year divested assets for more than €5 billion ($6.5 billion), surpassing the objectives outlined in the 2012-2016 strategic plan to divest between €4 billion and €4.5 billion in the period," the company said. "The funds obtained from the sale of the LNG assets will allow Repsol to boost its upstream organic growth strategy."
Repsol had also hoped to sell its Canaport LNG regasification terminal in Canada but an auction of the asset has stalled due to low North American gas prices. Repsol said that it was continuing to look at options for the business and will write down $1.3 billion of its value at the time that it closes the sale of the other LNG assets to Shell.
France's GDF Suez SA and Russia's OAO Gazprom were amongst a dozen companies that expressed initial interest in Repsol's LNG assets, though both later pulled out of an auction organized by Goldman, Sachs & Co.
Shell's acquisitions will add 4.2 million tons per annum of LNG plant capacity and 7.2 metric tons per annum of new LNG volumes through long-term off-take agreements. The acquisition continues Shell's rapid expansion into the LNG market, which CEO Peter Voser said earlier this year he expects will grow faster than oil. The Repsol deal will be the Hague, Netherlands-based group's biggest acquisition by equity value since it paid $4.7 billion for U.S. shale gas fields owned by East Resources Inc. in May 2010.
The cash payment to Repsol is about €1 billion higher than expected, noted Nomura International plc London-based analyst Theepan Jothilingham. He described the deal as "not exactly cheap," but felt it was positive for Shell as it adds volume to "one of the industry's largest and broadest LNG portfolios" and should prove to be "an attractive long-term purchase price." Repsol said it expects its sale to close before the end of the year. The Goldman team advising Repsol included Alistair Maxwell and Luis Puchol-Plaza. Repsol tapped Linklaters LLP for legal advice on the auction. Shell declined to name its advisers.
Shares in Repsol traded Wednesday at €15.86, up €0.4, or 2.6%, on their Tuesday close. Shell traded at 2,145 pence ($32.53), up 8.5 pence, or less than 1%.
Intermediate Capital Group hires Andrew Hawkins, Christophe Browne and Ricardo Lombardi to hunt zombie funds. For other updates launch today's Movers & shakers slideshow.
The three operators are on a losing streak and it's not clear whether their luck will change. More video