This needs to be analyzed from the case that what is the political condition of the area where YPF is operating, its economic condition. Social values, technological improvements, legal issues and environmental analysis. As oil products arehighlyregulated product which has very high intervention of the government so the politics play a vital role.
Company was in the final stages of designing the terms of the unsolicited tender offer for acquiring YPF, the largest Argentinean Company. Now the next steps were to decide the form of the payment and the financing of the offer.
The analysis for the three financing alternatives, which are debt, equity and the blend of debt and equity, needs to be performed along with their advantages and disadvantages.
In the case analysis, the linkage between the acquisition price, financing alternatives and the form of payment needs to be analyzed and the role of synergies would be considered in designing the financing for the deal.
Finally, recommendations would be made to the management of Repsol Company based on the tradeoffs and the financial analysis performed. Case Analysis We begin with the estimation of the value of the synergies, which would be created by this deal.
These are described in the section below. Repsol generates its majority revenues from gasoline stations and refining activities.
Moreover, it has to buy its crude oil from the other companies in the market. On the other hand, there are substantial reserves owned by YPF because the production and the exploration of the oil are the main activities of the company.
After the companies are combined, then the reserves of the combined firm will be quadrupled, the firm would vault among the top 10 international firms and they would have a more balanced business.
The volatility of the crude oil prices would also decline and the earnings volatility would reduce because of a more balanced source of the profits, which is from the downstream, and the upstream sources. A balance would be achieved between the downstream and the upstream operations and the activities of the combined firm could be expanded into other countries such as Latin America.
Apart from this, capital expenditure savings and operational synergies would also be generated and the financial strength would be enhanced with the huge business scale. Moreover, a number of non-core assets would also be sold off which do not generate value for its businesses in the different geographic areas such as in Latin America, Spain and North Africa.
Estimate of Value for Synergies The estimate of the value of the synergies is shown in exhibit 1 in the appendix. The total cash flow effects of the Repsol-YPF synergy are also shown in exhibit 2 in the appendix.
The dollar value of these synergies and the cash flow effects of the synergies, which are expected to be generated from to show that positive cash flows would be generated by the combined firm, which would enhance the value of the firm. This is almost same to the price offered by Cortina to the shareholders of YPF.
Therefore, Repsol is currently undervalued in the global equity markets because is market price is less than its intrinsic value.
However, now is not the right time for the management of the company to issue shares in the market This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.In April this year, Argentina’s president, Cristina Fernández, announced her decision to seize control over Yacimientos Petroliferos Fiscales (YPF), the former Argentine oil firm that since had been part of the Spanish oil company, REPSOL, under the joint name of REPSOL YPF.
Repsol has agreed to sell % of YPF to Lazard Asset Management, and a further % to other investors, at $/share. The sale of YPF shares is part of Repsol’s strategic goal to rebalance. Earlier this year, Repsol had received about $5 billion in compensation for its stake in YPF S.A.
(YPF - Free Report) as the Argentinean government nationalized the firm in The funds should. Those funds could be used for the acquisition of YPF, owned by the Argentine oil company Repsol, in a deal that would cost China National Petroleum and CNOOC US$17 billion, according to speculators.
Repsol YPF - a complete implementation model of balanced scorecards in the oil and gas sector SeUGI 19 – Florence, June ©Accenture 2 Accenture’s Vision and Experience Background: Weaknesses and Limitations of the Traditional Management Model Company cost structure has changed in recent years.
Repsol YPF has acquired the 28% stake owned by BP in the deepwater Shenzi field, in the Green Canyon area of the Gulf of Mexico, for the price of $2, million (EUR 1, million).
This acquisition will increase the company’s probable and proven reserves (2P) and will boost Repsol YPF’s.