Bloomberg News

Repsol Seeking to Oust Pemex, Sacyr From Board After Pact

September 29, 2011

(Updates shares in fifth paragraph.)

Sept. 29 (Bloomberg) -- Repsol YPF SA Chairman Antonio Brufau moved to oust representatives of two of the biggest investors from the board after they formed an alliance aimed at curbing his power and changing the oil company’s strategy.

Repsol, based in Madrid, changed its rules to prevent competitors from holding positions on its board after the agreement between Sacyr Vallehermoso SA and Mexican state-owned oil company Petroleos Mexicanos, Repsol said in a regulatory filing yesterday. Sacyr and Pemex, as the Mexico City-based company is known, said they would challenge the decision.

Anyone will be barred who has “a significant stake or holds a management position in a competitor or another concerted company,” according to an amendment to Repsol’s board rules after a meeting in Madrid. The board also endorsed the management of Brufau, who is also chief executive officer.

Brufau is fighting to retain control of Spain’s biggest oil company after Sacyr, the largest investor with a 20 percent stake, and Pemex, which owns almost 10 percent, said they want the company to split the roles of CEO and chairman and focus on its oil business to boost returns.

Repsol shares dropped 0.1 percent to 19.92 euros in Madrid.

Joint Statement

The Repsol board “attempted to deny the rights” of Pemex and Sacyr at yesterday’s meeting, the shareholders said in a joint statement. “They were denied the most basic information on the basis of a non-existent conflict of interests.”

Spain’s power regulator allowed Petroleos Mexicanos to keep its increased stake in Repsol, without requesting permission for its recent share purchases, the group said today in an emailed statement.

Sacyr Chairman Luis del Rivero, who is also vice chairman of Repsol, may be forced out of the board as a result of the changes unless he can win an exemption in a vote by other shareholders.

The benefits for Pemex of a closer cooperation with Repsol YPF will be worth $4.27 billion, the Mexico City-based company said in a filing to Spanish regulators Sept. 21. Increasing its stake in the Spanish oil company will help Pemex take on “highly complex” projects and deep-water drilling, the company said.

‘Worst Possible Road’

“If Pemex wanted to get access to more deep-water technology, skills or experience, it took the worst possible road,” George Baker, a Houston-based energy consultant, said in a telephone interview. “Oil companies do not work that way, having more shares doesn’t translate into more influence.”

By alienating Repsol’s top management, Pemex is further from its goal of obtaining experience and technology from them, Baker said. “They should have invested in projects, not in stakes in the holding companies,” he said.

Del Rivero revealed a split with Brufau in 2009 when he called on the company to boost dividends. Sacyr financed its investment in Repsol with a 4.9 billion-euro ($6.7 billion) loan that must be refinanced by December.

Repsol, which gets most of its revenue from oil production, also has a stake of about 30 percent in Barcelona-based Gas Natural SDG SA, Spain’s biggest gas supplier. Repsol jointly controls Gas Natural through an agreement with La Caixa, which has 35 percent.

The Mexican oil company expects to boost the success of exploration projects from 38 percent in 2010 to about 40 percent with the help of Repsol, according to a company presentation.

“The idea that a board seat would give you the deep-water skills you need, it’s a dream,” Baker said.

--With assistance from Emma Ross-Thomas in Madrid. Editors: Dale Crofts, Laura Price

To contact the reporters on this story: Ben Sills in Madrid at bsills@bloomberg.net Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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