Structuring Repsol's Acquisition of Ypf S.A. (A)

Abstract

In April 1999, the CEO of Repsol S.A., the large Spanish oil company, seeks to design the terms of an unsolicited tender offer to the shareholders of Argentina's largest oil company, YPF. The value to be paid per YPF share has been set. Remaining to be decided are: (a) form of payment, and (b) form of financing, if it is to be a cash deal. The task for the student is to sort through the advantages and disadvantages of three financing alternatives, using a framework such as FRICTO, and to make a recommendation. The objectives of this case are to: (1) illustrate the linkage between acquisition price, form of payment, and acquisition financing; (2) exercise analytical frameworks for comparing financing alternatives; (3) consider the important role of synergy expectations in designing financing. The case was prepared for use in an MBA elective on mergers and acquisitions, though it could be easily adapted for teaching concepts of corporate financing.

Excerpt

UVA-F-1282

Rev. Feb. 11, 2014

STRUCTURING REPSOL'S ACQUISITION OF YPF S.A. (A)

Repsol will seek to negotiate with YPF to achieve a successful integration of the two companies.

—Repsol S.A.

It was a shock to Alfonso Cortina, Repsol's chief executive, when he was cold-shouldered at his first YPF board meeting…The Argentine company, under the leadership of Roberto Monti, appeared determined to resist Mr. Cortina's efforts to start integrating the companies' activities.

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Keywords: mergers and acquisitions, corporate financial strategy