Essay on Repsol YPF valuation

1845 Words Jan 23rd, 2014 8 Pages
Session 6 – Structuring Repsol’s Acquisition of YPF

Suggested Questions:
1) How significant are the expected synergies and restructuring effects? Please prepare an estimate of the value of these.

For Repsol and its shareholders, the YPF acquisition deal is seen as an ideal strategic match. The Spanish oil company gets most of its revenues from activities like refining and gasoline stations, and must buy much of its crude oil from others, while YPF owns substantial reserves because its activities are dominated by exploration and production of oil. As a united company, Repsol will have a much better balance of business, quadrupling its reserves, and vaulting into the big leagues of the top 10
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Blended financing gives minimum variation in valuation of Repsol – YPF . The variations in default risk are significant in assessing the alternatives as that affects WACC and hence valuation.

6) What course of action would you recommend that Alfonso Cortina adopt regarding form of payment and financing for the tender offer for YPF? On what “key bets” does your recommendation depend?

Cortina should make an all cash payment to acquire YPF at 44.78$ per share to avoid the disadvantages of equity financing and also considering bylaws of YPF.

Repsol’s strategic plan is based on three fundamental premises: growth, transformation of portfolio and profitability. The primary objective for Repsol is to guarantee sustainable dividend growth for its shareholders. Repsol will implement a strategy of profitable growth for all of its businesses, based on the optimisation of existing projects, the development of new projects, and the analysis of possible business opportunities in areas of interest to the company. It states that the downstream business which includes chemicals will contribute solid growth and stable cash flow for the company. The Repsol chemical business is believed to hold a 'sound position in international markets', strengthened by a high integration with the refining and exploration and production business areas, access to competitive

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