Repsol YPF Case Study Solution
Premise of the Case
  • Repsol, a Spanish company, is looking to acquire oil assets in
    Latin America.
  • Currently owns 15% of YPF, an Argentinian company. Would like
    to acquire the rest of YPF.
  • Need to propose the cross-border M&A tender offer to YPF
    shareholders and repel potential competitors.
  • Offer financing options include cash, shares of Repsol stock, or
    mix of cash and stock. Need to evaluate the options.
Structuring Repsol’s Acquisition of YPF(A)
1.        How significant are the expected synergies and restructuring effects?  Please prepare an estimate of the value of these.

2.        Please assess the price that Cortina proposes to offer to YPF shareholders.  At $44.78 per share, would Repsol underpay,
overpay, or just a fair price?

3.        Please assess the current pricing of Repsol shares in the market.  Is Repsol undervalues, overvalues, or just fairly values in
the global equity markets at this time?  Is new a good time to issue Repsol shares?

4.        Compare the relative advantages and disadvantages of offering to the shareholders of YPF either (a) cash or (b) shares of
Repsol.  If you were a shareholder in YPF, which form of consideration would be more attractive (assuming that the amount of
consideration would be constant at $44.78 per share)?

5.        Whether or not you recommend a cash-based offer for YPF, please compare the relative advantages and disadvantages of
the (a) all-debt-finances cash offer, (b) all-equity-finances cash offer, and (c) blended financing of debt, preferred stock, and equity.  
How significant are variations in default risk in the assessment of the financing alternatives (see case Exhibit 10)?

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?
Repsol Corporate Profile
Repsol YPF is an integrated Spanish oil and gas company with
operations in 29 countries, the bulk of its assets located in Spain and
Argentina. The product of a 1999 takeover of Argentine energy firm YPF
by the Spanish conglomerate Repsol S.A. within the controversial
privatizations by president Carlos Menem, it is now one of the world's
ten largest oil enterprises, employing over 30,000 people worldwide.

In May 2006 Repsol announced it was planning to float between 15%
and 20% of YPF's shares in Argentina's stock market.
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