Minister warns Pemex that Repsol must stay "Spanish"

Sacyr to benefit from pact with Mexican oil giant amid calls for changes to board representation

Industry Minister Miguel Sebastián on Tuesday said he would defend the "Spanishness" of Repsol YPF after Mexico's Petróleos Mexicanos and Sacyr Vallehermoso said they would syndicate their stakes in the country's largest oil firm in a move that could see a makeover in its management.

Sebastián said he would speak to the managers of Pemex and Sacyr to find out about their plans for Repsol. "We welcome an operation within the law that would increase the potential of Repsol, but of course guaranteeing its Spanishness," the minister said. "We don't have any information on what the plans of this foreign company [Pemex] are. I will have the opportunity to meet with them today [Tuesday] to gather a little more information."

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Sebastián said the government did not intervene in corporate operations, but added that Repsol was a "very important company" of a "strategic" nature that so far had been "very well managed."

In a statement filed late Monday, Spanish builder Sacyr Vallehermoso and state-controlled Mexican oil firm Pemex said they had signed an agreement under which they would vote together in important decisions taken by Repsol YPF.

The statement said under the deal Repsol would remain "independent" under the "Spanish flag."

Sacyr holds 20 percent of Repsol and Pemex 4.8 percent, which it plans to increase to 9.8 percent by acquiring another 5 percent in the market over the next few weeks. That would give the two shareholders a combined 29.8 percent in Repsol, just below the 30-percent level that would trigger a mandatory takeover bid.

The companies said they would seek representation on Repsol's board in keeping with their holding in the company, which they said is "not adequately valued" - an indication of discontent with the current management, in which Antonio Brufau acts both as chairman and chief executive officer.

Pemex and Sacyr's statement said they would consider the separation of the duties of the chairman and CEO of Repsol as "positive."

Sacyr Chairman Luis del Rivero has long been at odds with Brufau over Repsol's strategy, particularly its dividend policy. Sacyr needs to refinance a 4.9-billion-euro loan - some 45 percent of its total debt -it took on to acquire its stake in Repsol by the end of this year.

"We would not rule out a change of CEO and, as a result, a more attractive shareholder remuneration policy that would benefit Sacyr," Spanish brokerage Banesto Bolsa said in a note to clients.

Both Sacyr's and Repsol's share prices gained strongly on Tuesday. Sacyr closed the session up 12.25 percent at 5.26 euros after hitting an intraday high of 5.29 euros, while Repsol put on 4.15 percent to 19.68 euros.

"The deal is positive news for Repsol shares," Bloomberg quoted Investec Securities analyst Stuart Joyner as saying. "Brufau will stay on as an executive as he is very well-regarded, but we'll see the CEO and chairman roles split early next year. Having a relationship with Pemex is a strong step further in Mexico and Latin America."

The latest development in Repsol comes just two months after the introduction of a new law that removes anti-takeover restrictions on company by-laws limiting the voting rights of shareholders. Repsol's statutes limit the voting rights of any individual shareholder to 10 percent of its share capital.

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