Sources who are close to Spanish oil major Repsol's board disclosed on Wednesday that the board is set to accept compensation for giving up its stake in YPF for less than half the amount the company demanded. The state of Argentina was prepared to nationalize the Argentine unit of Repsol by seizing the latter's 51% ownership stake.
Nationalization is the process of taking a private asset or a company into public ownership by a national government.
According to a Reuters report, the seizure of the government of Argentina of YPF was the root of the cause of tensions between two nations. Spain and Mexico, of which is a core shareholder in Repsol via Pemex, its state oil monopoly, has tense relations stemming from how the dispute was handled. Repsol and the Spanish government were reportedly also not happy with the nationalization of YPF.
One of the sources said, "The initial agreement already has the backing of Repsol's management, its main shareholders and the governments, meaning that with all probability the board will give the green light."
Another sources, who is close to one key board member, said Repsol has a positive outlook on the deal, which had been seeking to receive USD10.5 billion, and that the deal would be most unlikely to be rejected on Wednesday at the meeting. Repsol was said to accept USD5 billion in bonds instead.
The proposal was reportedly thrashed out at a Buenos Aires meeting with Spanish, Argentine and Mexican government representatives and top Repsol executives and board members in attendance. The move, said the Reuters report, indicated the support in the deal across all entities that will end rancour and legal wrangling that ran for 18 months.
Shares of Repsol increased 4.25% to EUR19.24 per share, which was a top gainer on an otherwise flat .IBEX, the blue-chip Spanish index, which showed that investors were glad at a potential ending of a year-long business and national interest conflict.
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