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Wed 16 Feb 2011 04:09 PM

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Abu Dhabi ups refining drive with Cepsa takeover

Total sells 48.8% Cepsa stake for $5bn; IPIC offers €28 per share in full bid for Spanish company

Abu Dhabi ups refining drive with Cepsa takeover
SPANISH STAKE: Abu Dhabis state-owned petroleum holding company agreed to buy Total SA’s stake in oil refiner Compania Espanola de Petroleos SA (Bloomberg Images)

Abu Dhabi increased its refining exposure by taking over Cepsa after buying
half the Spanish oil company from French group Total for €3.7bn ($5bn).

Wednesday's deal allows oil-rich Abu Dhabi to extend its refining capacity,
while giving Total cash to invest in upstream developments.

The acquisition is being made through IPIC, a wholly-owned Abu Dhabi
government fund which has a mandate to invest in the oil sector outside the
emirate. It raised its Cepsa stake to 47 percent in July 2009 for $4.7bn from
9.6 percent in 1988.

Last June, IPIC's assets totalled $48.2bn. It also owns stakes in German
automaker Daimler and Virgin Galactic through its majority-owned Aabar

Total dismissed speculation it would use the Cepsa proceeds to take control
of Spanish rival Repsol by buying a 20 percent stake from debt-laden Spanish
builder Sacyr.

"A takeover of Repsol would make no sense as this would go directly
against our goal to reduce our European refinery capacities," a Total
spokesman said.

Sacyr shares fell 5.7 percent.

"Total is more interested in looking east with the proceeds from the
sale, not west," ING analyst Jason Kenny told Reuters.

If Total was seeking a pure upstream play, any investment in Repsol would be
half refining, unless it was able to invest in Repsol Brazil. However, Repsol
has already sold nearly half of that venture in a deal with China.

"It seems strange that Total would abandon its presence in Spain
without retaining any holding. It knows the Spanish market well," Alvaro
Navarro of Intermoney said.

Total's share in Cepsa's oil and gas production represented only 1 percent
of its overall oil and gas production when measured by SEC rules. This was
relatively insignificant for the French oil group, making Cepsa's refining
business a relatively bigger drag than the upstream benefit.

Total and Cepsa had upstream interests in Algeria, Colombia, Egypt, Peru
and, to a lesser extent, in Spain.

IPIC launched a full bid for the remaining quoted shares in Cepsa at €28 per
share, a 23 percent premium to Tuesday's close.

Cepsa shares, suspended ahead of the announcement, reopened up 23.6 percent
at €28.19. ($1 = €0.7406)


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