YPF seizure interrupts US$15 billion Sinopec takeover bid – Spain threatens economic action

Sources have revealed that the Argentinian Government’s recent decision to nationalise the formerly Repsol-owned company YPF has interrupted a non-binding takeover agreement with Chinese player Sinopec that was valued at over US$ 15 billion.

One analyst was quoted by Reuters as saying that the likelihood of the takeover deal continuing now was unlikely because, “it’s too hairy for any Chinese major to put in that much money, unless there is a special relationship with the Argentinian, which I doubt. … This is a challenging situation for anybody given the government action. To me it looks like political suicide to allow a Chinese company to own YPF soon after announcing the nationalisation. I don’t think they can go flip-flop like that.”

Even if a deal were to go ahead between Repsol and a company wishing to buy YPF, the Argentinian government would almost certainly block the transaction.

Spanish Reaction 

Meanwhile, the Spanish government has threatened economic retaliation for the seizure of the company. The Spanish Prime Minister, Mariano Rajoy, said “I must express my profound unease. It’s a negative decision for everyone.” He later added that YPF had been taken over “without any justification.”

Spain’s industry minister, Jose Manuel Soria spoke of consequences for Argentina’s actions: “They will be in the diplomatic field, the industrial field, and on energy.” Some analysts, however, have pointed out that there is little Spain can do as it has no real leverage over Argentina. In addition, Argentina has proven before that it can be resilient to external diplomatic and economic pressures.

The Battle Continues

Repsol, the company that owned a controlling 57.4% stake in YPF has valued the whole company at US$ 18 billion, with Repsol’s stake at US$ 10.4 billion and has announced that it would seek appropriate compensation.

Compensation of this magnitude, however, is unlikely to be forthcoming as Argentina’s deputy minister for the Economy, Axel Kicillof, said “We’re not going to pay what they say … We need YPF’s objectives to match Argentina’s objectives … The state is the solution.”

Repsol’s chairman has stated that, “This battle is not over. The expropriaton is nothing more than a way of covering over the social and economic crisis facing Argentina right now.”

Weighing into the debate, the President of the European Commission, Jose Manuel Barroso, and the British Foreign Secretary, William Hague, have both criticised the takeover.

Written by David Bizley

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/18042012/ypf_takeover_blocks_usd15billion_bid_by_sinopec/