Repsol gets out of Gas Natural after over 20 years: agrees on sale of its 20.07 % stake at €19/share


Repsol has reached an agreement to sell its 20.072% stake in Gas Natural to Rioja Bidco Shareholdings, a company owned by funds advised by CVC. The sale price was 3.8 billion euros and the transaction will provide the oil company with approximately 400 million euros of capital gains.

The price for the share sale agreed on between Repsol and CVC implies a premium of 4% on Gas Natural’s closing share price yesterday (18,28 euros). It’s also the same price as GIP paid Repsol for 10% of the gas company over a year and a half ago. The closure of the deal is subject to obtaining, within a period of no more than 6 months from the signing of the contract, authorisation from the competition authorities in Mexico, South Korea, Japan and Germany for the consolidation operation which the sale will mean in these markets.

Whatsmore, it has to count with no opposition, whether explicit or tacit, from the Central Bank of Ireland in relation to the indirect acquisition of a significant stake in the company Clover Financial & Treasury Services Ltd in the same period of no more than six months.

Criteria Caixa will remain as the main shareholder in Gas Natural Fenosa, with a 24.4% stake, now followed by CVC and GIP, which each have 20% of capital. Sonatrach is the fourth biggest shareholder with 4%.

The fund CVC is a classic investor in the Spanish market, where it currently has stakes in companies like CLH, where it is the main shareholder with 25%, Cortefiel, Deoleo or Vitalia Home. It has also been involved with Abertis, El Árbol or the operator R, amongst others.

Repsol’s exit from Gas Natural puts an end to a relationship which goes back to 1991, when Gas Natural SDG was created. It was the fruit of the merger between Catalana de Gas and Gas Madrid and the channelled gas distribution assets contributed by Repsol, which then still belonged to the National Institute for Hyrdrocarbons.

On February 28, during its Q4’17 results presentation, Repsol will announce what it will do with the cash obtained from the sale of its 20.07% in Gas Natural.

Bankinter analysts see three possible alternatives: a) cut debt, b) share buyback and subsequent redemption, c) investment in renewables (Renovalia o X-Elio).

If it earmarks 100% of the resources to buyback treasury stock and later redeem it, this would amount to 17.4% of capital at current prices. If it uses the resources to cut debt, this would drop from 6.972 billion euros (Net Debt/Ebitda 1,10x) to 3.156 billion euros (Net Debt/Ebitda 0,52x).

Notwithstanding, the analysts flag that the most favourable option would be a hybrid strategy of a share buyback along with debt reduction.

It still remains to be seen what will happen with the parasocial pact in Gas Natural which Criteria, with a 24% stake, has with Respol. Thanks to this agreement, they had joint control of the gas company.

For Renta 4 analysts:

The entrance of a new investment fund could increase the rate of divestments planned for Gas Natural.

The group’s strategy is expected in the first half of 2018 after the change in the executive presidency.

Renta 4 reiterates its Hold recommendation, with a target price of 19,9 euros/share for Gas Natural; and Overweight in Repsol.


About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.